June 01, 2001
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email:CGalen@nmpf.org
The USDA announced late Thursday that it is adjusting downward the government purchase price for nonfat dry milk powder, from $1.0032/lb., to $0.90/lb. That price represents the level at which the USDA's Commodity Credit Corporation will purchase surplus nonfat dry milk. The ten cent reduction in the support price for milk powder will have a detrimental impact on dairy farm prices, because the farm level price of milk is directly tied to the value of nonfat dry milk.
“We are very disturbed by the USDA's decision, and by the narrow criteria they apparently used to reach it,” said Jerry Kozak, Chief Executive Officer of NMPF. “We knew the USDA was considering making a downward adjustment in the price support program. However, we hoped that the Department would recognize the economic pain that farmers will suffer as a result, and make it the primary factor behind whether they would take this action. Unfortunately, they did not.”
NMPF estimates that total U.S. dairy farm revenue will drop by $818 million over the course of the next year, as the result of lower Class IV prices for nonfat dry milk powder resulting from this action. The price of other classes of milk and dairy products, including bottled milk (Class I) and ice cream and yogurt (Class II), are also tied to the milk powder price. So Thursday's decision will also reduce dairy farm revenue from those two classes of milk. The total reduction in farm prices will average $0.49 per hundredweight [chart on page 3 illustrates state-by-state loss of revenue].
“Although this decision weakens the value to dairy producers of the price support program, the program remains the key to providing a minimal level of support to farmers when market conditions periodically deteriorate. Despite the USDA action, our organization will continue fighting to extend the program beyond 2001, into the 2002 Farm Bill,” Kozak said. Currently, the price support program is scheduled to expire on Dec. 31st.
Kozak added that with lower farm prices resulting from this decision, “we certainly hope that dairy processors and retailers will pass their lower costs for milk on to consumers. We would be doubly disappointed if consumers did not see even lower prices for their dairy purchases, because it would mean that the processors and retailers would be using this as an opportunity to improve their margins at the expense of farmers and consumers.”
One of the reasons that proponents of this cut have cited for their support is that they believe it will make exports of U.S.-produced nonfat dry milk more competitive in world markets. Kozak said that NMPF disagrees with that “overly optimistic assessment, and we will be carefully monitoring the sales of skim milk powder to determine if in fact our competitive position significantly improves as a result of this price cut. We sincerely doubt that it will, simply because our international competitors will now lower their milk powder prices accordingly to keep their exports moving.”
Kozak said that this action also means that dairy farmers must now redouble their efforts to pass legislation that would impose U.S. tariffs on imports of milk protein products. Imports of milk protein concentrate and casein are surging, and are displacing domestically-produced nonfat dry milk powder in the manufacture of cheese and other foods using dairy proteins.
“The only way to make the milk bottle look half-full in response to this decision is by using this as a catalyst to address the fundamental problem we will continue to have with MPC imports,” Kozak said.
The National Milk Producers Federation, headquartered in Arlington, VA, develops and carries out policies that advance the well-being of U.S. dairy producers and the cooperatives they collectively own. The members of NMPF's 28 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of 50,000 dairy producers on Capitol Hill and with government agencies.
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