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Klobuchar Urges Action to Support Minnesota Farmers Facing Dairy Crisis

Thursday, February 12th, 2009 at 11:23 am

Washington, D.C. – With the price of milk and dairy products falling sharply, U.S. Senator Amy Klobuchar today called for action to help stabilize prices and protect Minnesota’s farmers.  In a recent letter to the Agriculture Secretary Tom Vilsack, Klobuchar and more than 30 other senators urged the United States Department of Agriculture (USDA) to immediately enact measures to address the problem of abrupt price drops.

“Farmers are especially vulnerable during these tough economic times,” said Klobuchar.  “Across Minnesota, dairy farmers are struggling as a result of this economic crisis.  We need to provide immediate and targeted support to stabilize prices and help dairy farmers who are hurting.”

Falling prices of dairy products, combined with unusually high costs and a drop-off in international demand due to the global economic crisis have imperiled the dairy industry.   The price of cheese has dropped 40 percent in a little more than a month.

In the letter, the Senators urged the USDA to: more effectively implement the Dairy Product Price Support Program (DPPSP) to restore stability and clear oversupplies in the market; direct adequate resources toward timely and efficient inspection of dairy commodities purchased through the DPPSP; consider additional dairy purchases for distribution through the USDA commodity-based nutrition programs; examine ways to more formally utilize the Dairy Export Incentive Program.

The full text of the letter is below:
The Honorable Tom Vilsack
Secretary
United States Department of Agriculture
1400 Independence Ave., SW
Washington, DC 20250

Dear Secretary Vilsack:

Since last summer our domestic dairy industry has been grappling with a serious imbalance which threatens the stability and future of American dairy farmers. Falling domestic prices combined with relatively high input costs have put an extraordinary strain on the entire dairy sector. The global economic crisis has further exacerbated these challenges by reducing international demand which, in turn, diminishes the price our dairy farmers receive for their milk. Cheese at the Chicago Mercantile Exchange (CME), which had been relatively stable in November and early December at just under $1.80 per pound, sunk 40% in late December to slightly less than $1.10 per pound.

Though some input costs have more recently stabilized from record highs, this modest relief is not enough to offset the persistent low prices confronting dairy producers. Across the nation, dairy farmers face the prospect of losing money every time they milk a cow. Continued low prices could devastate not just dairy farmers and the dairy industry, but thousands of rural communities where agriculture and dairy are primary economic engines.

While the USDA’s Dairy Product Price Support Program (DPPSP) provides a floor for dairy product prices, we believe it could be more effectively implemented to restore stability and clear oversupplies in the market. For example, packaging standards for cheese committed under the DPPSP are somewhat different than industry norms utilized for cheese which trades through the CME. We encourage you to examine whether some harmonization can be accomplished without adversely impacting the quality of the product purchased by USDA. We also encourage you to direct adequate resources toward timely and efficient inspection of dairy commodities purchased through the DPPSP. Anecdotal evidence suggests that inspection delays are creating problems.

We also urge you to consider additional dairy purchases for distribution through the USDA commodity-based nutrition programs. Demand for these nutritious products by low income individuals, food banks and schools will undoubtedly continue to increase and dairy products like cheese are often among the most popular products available.

Feeding programs can be better served by the price support program if USDA plans for it. To that end, we are troubled by the previous administration’s decision to stop purchasing value-added dairy products at a slight price premium through the DPPSP. According to the enclosed USDA document, since at least FY1996 the DPPSP has purchased fortified nonfat dry milk, packaged instant milk, butter prints and 2 or 5 lb blocks of processed cheese at prices which account for the cost of packaging. If a portion of DPPSP commodities are ultimately distributed through USDA nutrition programs, it seems logical to purchase products in forms that are more conducive to these uses.

Finally, with global dairy markets influencing the price of US dairy products, we recommend that the Department examine ways to more fully utilize the Dairy Export Incentive Program (DEIP). As you know, DEIP provides incentives to exporters of dairy products to help them compete with subsidized products from other nations. With the recent announcement by the European Union that it will increase export subsidies, DEIP is an important tool to help keep US dairy products competitive.

We look forward to working with you to meet the needs of farmers, rural communities and the food insecure during these challenging times.

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