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Dairy Producers To Get Relief

posted on October 2, 2009


America's pork industry is struggling to weather a "perfect storm" of events that threatens to put some producers out of business.

The problems began last summer, when prices for corn -- the chief feedstock for hogs -- soared to record highs. In the wake of the rally came the H1N1 virus, which -- unfortunately and inaccurately -- was labeled by some as "swine flu." Despite repeated announcements by officials that it's impossible to get H1N1 by eating pork. Irrational fears remain in the most lucrative export market for U.S. pork: China.

The result, exports to China are half of what they were last year and prices paid to U.S. producers are down nearly 50 percent.

The dairy sector also is enduring a similar collapse in prices, but this week farm state lawmakers came to the rescue of dairy producers.

Dairy Producers To Get Relief

A joint House-Senate Congressional conference committee hammered out the details this week on a $350 million relief package for beleaguered dairy producers. $290 million are slated for direct payments through a yet to be created USDA distribution program Though details are sketchy, legislators did specify direct payments would be capped at 3 million pounds per producer, which experts estimate is equal to the annual output of approximately 200 cows. The remaining $60 million will be used to purchase surplus cheese and other dairy products.

The compromise was reached after some wrangling between Congressional members from states with traditionally large dairy operations -- like California and New Mexico -- and lawmakers from other states where dairy operations are smaller -- like Vermont and New Hampshire.

Class III milk futures prices fell from about $20 in June of last year to less than $10 last spring. According to National Milk Producers Federation, the U.S. herd was 171,000 cows smaller in August than a year ago and production has been cut by the largest amount in five years. Though prices have strengthened somewhat during the past two months, prices being paid to dairy farmers are well below the cost of production. The outlook for 2010 depends on how many farms weather the economic storm.

The $350 million dairy package announced this week is part of USDA's annual budget appropriation of $121 billion which has yet to be approved by the entire Congress.

 


Tags: agriculture Congress dairy government industry markets meat milk news pork USDA