Wisconsin Ag Connection - Reaction Varied Over USDA's Decision to Boost Dairy Prices

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Reaction Varied Over USDA's Decision to Boost Dairy Prices
Wisconsin Ag Connection - 08/03/2009

In a move that will hopefully affect Wisconsin's agricultural industry for the better, the U.S. Department of Agriculture announced on Friday that it will increase the amount paid for dairy products through the Dairy Product Price Support Program from August through October. Ag Secretary Tom Vilsack says the price paid for nonfat dry milk will increase from $0.80 per pound to $0.92 per pound; the price paid for cheddar blocks will go from $1.13 per pound to $1.31 per pound; and the price of cheddar barrels from $1.10 per pound to $1.28 per pound.

Within hours, many of Wisconsin's Congressional representatives were issuing comments. Rep. Dave Obey, the state's longest serving lawmaker in Washington, said while this is not enough to make up for everything that dairy farmers are losing, it will still help.

"The Secretary's actions mean close to $2 per hundredweight for milk that goes into cheese and will provide an immediate boost to Wisconsin dairy farmers' bottom lines," Obey said. "That comes on top of more than $100 million that Wisconsin dairy farmers have so far received under the Milk Income Loss Contract program."

U.S. Senator Russ Feingold said he was pleased with the agency's quick response after his staff met with Vilsack just last week to request more aid for dairy producers.

"While I and farmers throughout the state would have liked to have seen the floor price raised higher, this relief is welcome news in this difficult economic climate," Feingold said.

Governor Jim Doyle chimed in to say that the move will add about $35 million to the income of Wisconsin dairy farmer alone.

"At $9.97 per hundredweight, the current farm gate milk price was the lowest since 1923 when adjusted for inflation and was less than half what it was a year ago," Doyle calculated. "This action is on top of the approximate $1 billion in efforts already made to improve the market for dairy through exports, nutrition programs and the MILC program.

Meanwhile, the leader of the Wisconsin Farm Bureau said any news of assistance from the USDA is welcomed. But Bill Bruins says he has some concerns with how the plan will actually work; and how it might negatively impact the dairy market when it eventually rebounds. He says raising the price paid for cheddar blocks will equate to an approximately $1.80 per hundredweight boost for dairy farmers--but would still result in prices received that is below the cost of production.

"Many cheese plants are not set up to sell to the government, so there will be a lag time involved," Bruins said. "This relief plan is so temporary, just three months, that I have concerns that not all cheese processors will go through the trouble of meeting the government's standards, which will minimize the price impact."

The Farm Bureau proposed making changes to the MILC program for a three month period, retroactively for the months of July through September.

USDA's action sent milk futures almost five percent higher on Friday, and cheese prices about six percent higher at the Chicago Mercantile Exchange.

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