Ag Policy Blog

Lawmakers from major dairy states are pushing USDA to help dairy farmers struggling with low prices. In a bipartisan letter from both senators and congressmen, the lawmakers cited sharp declines in income, "which is placing our nation’s dairy industry in an extremely vulnerable position."

In a letter to Agriculture Secretary Tom Vilsack, lawmakers stated the dairy industry "is reeling from low prices, a glut of imports, challenges in our export markets, and poor economic growth ..." The senators and congressmen want USDA to use its existing authority to boost support for dairy producers. Specifically, the lawmakers called on Vilsack to use his authority under the Commodity Credit Corp. to find ways that would inject some additional assistance or aid to farmers.

Sen. Patrick Leahy, D-Vt., spearheaded the letter with Rep. Joe Courtney, D-Ct., Sen. Bob Casey, D-Penn., and Sen. Tammy Baldwin, D-Wis. The letter included the names of 27 senators and 34 congressmen. Rep. Collin Peterson, D-Minn., ranking member of the House Agriculture Committee, was among those that signed, but chairmen of the House and Senate Agriculture Committees were not listed on the letter.

In the letter to Vilsack, lawmakers cited that milk prices have fallen 40% since 2014 while chest stocks in May were reported at their highest level since records were first kept in 1917. Market expectations indicated the dairy market will continue to struggle, lawmakers wrote Vilsack.

Lawmakers cited some of the reasons for the depressed market situation. "A number of factors have contributed to this crisis. U.S. milk production has increased almost two percent above last year’s level, while global milk production is up significantly, partly as a result of the European Union’s decision to remove its milk production quotas and the loss of their export market to Russia. Furthermore, we are seeing an increase in production in other major milk-producing countries that have led to these depressed prices globally. All of this comes as our dairy farmers are still adjusting to the new Farm Bill, and the many changes that were made to our dairy support programs."

The Vermont congressional delegation stated, “Our dairy farms and the hardworking families that keep them running in communities in Vermont and across the nation are enduring an extremely tough summer as prices have plunged to a nearly ten-year low, well below the cost of production. This comes on the heels of a very challenging spring, and we are deeply concerned that the current price forecasts remain dire for our farmers. That is why we have come together today, Democrats and Republicans from across the country, to call on USDA to act with urgency, using every tool and authority at their disposal, to help our struggling dairy farmers. They cannot wait. They need our help now.”

I asked DTN Commodity Analyst Rick Kment about the current situation with dairy prices. He said milk prices have bounced higher just recently with front month Class III milk futures trading in the $13 per cwt price range until the month of July. Current front month futures are trading at $15.26 per cwt, which for many operators should be at or near breakeven levels, especially with the lower feed costs seen through the market over the last few weeks. But the focus on price protection continues to be based not on current milk market prices, but prices seen through the first half of 2016. Prices from January through June have traded below $14 per cwt, with May front month futures prices trading below $13 per cwt. The largest concern through the dairy market is that domestic dairy product prices are still well above world prices, and this is severely limiting export demand. Continued limits to export of dairy products may continue to cause milk prices to remain depressed, irrelevant of feed costs and production costs.

In May, the chairman of the National Milk Producers Federation testified before the House Agriculture Committee that farm income this year from dairy sales would fall to the second-lowest levels in the last decade, a $20 billion decline from 2014. Additionally, the country has lost more than 18,000 dairy farms over the last decade as well. http://agriculture.house.gov/…

The letter from lawmakers can be found on Sen. Leahy's website. https://www.leahy.senate.gov/…

The letter come after USDA used its authority in June to help out cotton producers suffering from low prices by providing up to $300 million in a cotton ginning cost-share program that paid cotton farmers based on acreage costs for ginning in the region.

Across the pond, the European Union also has responded to farmer protests earlier this year by drafting policies to reduce dairy supplies and provide more direct aid to both dairy and pork producers. Regarding dairy, the EU is reestablishing some supply management policies less than two years after abolishing production caps.

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