WASHINGTON, Aug. 12, 2016 – The National Milk Producers Federation is asking USDA to spend between $100 million and $150 million to buy cheese off the market to help out dairy farmers who are suffering from record low prices, weak exports and strong domestic supplies.
“In light of the damaging cost-price squeeze affecting many of the nation’s dairy farmers, I am writing to urge you to examine all available avenues to provide assistance,” Jim Mulhern, CEO of the National Milk Producers Federation, said in a letter to Agriculture Secretary Tom Vilsack. The aid could include “the direct purchase and distribution of cheese to the needy, as well as any other assistance that could be provided through the Farm Service Agency, the Food and Nutrition Service, Commodity Credit Corporation or other program authorities,” Mulhern said in the letter.
The USDA is now working with the dairy industry on some form of assistance package, according to one government official who asked not to be named because the details are still being worked out.
Mulhern’s letter was sent a day after the American Farm Bureau Federation wrote to Vilsack asking USDA to spend $50 million to buy up about 28 million pounds of cheese.The NMPF request is substantially bigger and could take as much as 90 million pounds of cheese off the market. Buying and donating that much cheese, Mulhern said in the letter, “would remove the equivalent of almost 900 million pounds of milk from the domestic commercial market” and that could push farm-level milk prices up by as much as 16 cents per hundredweight over a 12-month period.
Mulhern said that would increase incomes for dairy farmers by about $380 million.
The primary reason for the large domestic supplies and lower prices is a sharp drop in exports, Mulhern said. China, a key market, has cut imports, and Russia continues to ban U.S. milk.
“On the supply side, the termination of milk production quotas in the European Union in April 2015 has led to a surge in EU milk production, large stocks of milk powder and increased exports priced at below-cost market clearing levels,” Mulhern explained.
American-type cheese exports reached more than 25 million pounds per month in early 2014, but foreign sales have barely topped 10 million pounds in each of the first five months of 2016, according to USDA data referenced in the letter. Conversely, U.S. monthly cheese stocks were hovering at about 630 million pounds at the beginning of 2014, but the latest data this year shows monthly stocks reaching nearly 760 million pounds.
Another problem, Mulhern said, is rooted in the 2014 farm bill’s Margin Protection Program.
“We are very appreciative of the improvements that the USDA has made to the MPP to date,” he said. “However, due to limitations of the program approved by Congress, few dairy farmers have coverage at levels that will provide sufficient support this year. In addition to the financial assistance requested above, we would also ask that the department work with us to identify other potential avenues to further strengthen the MPP.”
Not nearly enough dairy farmers have been signing up for the MPP, Rep. Collin Peterson, the ranking Democrat on the House Agriculture Committee, said earlier this year.
Peterson told reporters in May that he recognized that there was a problem and said he was working with industry representatives to improve the program.
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