The National Milk Producers Federation and International Dairy Foods Association are jointly asking USDA to rescue the industry from the impact of the COVID-19 pandemic by paying farms to cut production and providing forgivable loans to processors to keep buying milk.
Under the “Milk Crisis” plan, producers would be paid $3 per hundredweight on 90% of their production if they cut production by10% from March 2020 levels. The program would run for six months from April through September.
Processors would receive forgivable loans similar to the loans being provided to small businesses under the new Paycheck Protection Program administered by the Small Business Administration.
The loans would be forgiven if the processors continue to purchase milk from producers and maintain company staffing.
“Collapse of food service industry, massive economic insecurity, export disruptions and seasonally rising milk supply creating a massive gap between dairy supply and demand,” the plan says.
The groups estimate that supply exceeds demand by at least 10% and that the gap could widen as shelter-in-place requirements remain in force.
Additional recommendations include proposals to compensate producers and handlers for milk that must be disposed of because of supply chain disruptions and buying milk for federal feeding programs.
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The organizations also want USDA to eliminate all restrictions in the Women, Infants and Children nutrition program on all fat levels of milk through the rest of the year. School feeding programs also should be allowed to continue operating under Summer Food Service Program rules that permit all fat levels of milk and serving sizes larger than eight ounces.
The plan also asks USDA to reopen enrollment in the Dairy Margin Coverage, a step NMPF had requested earlier.
No cost estimate was provided for the recommendations.
An analysis by Rabobank says that a surge in retail milk sales following the gathering helped absorb the seasonal “spring flush” rise in production.
However, “by mid-second quarter, if not earlier, the sector will face the logistical and economic challenges of excess milk and commodity dairy products. The surge in retail demand is forecast to subside and no longer offset declining foodservice and export demand,” the analysis said. About 40% of total cheese production is used in foodservice and more than 65% of nonfat dry milk powder is exported.