Iowa Public Television


Dairy Producers Battle Basement Prices

posted on August 22, 2003

Poultry producers on the Delmarva Peninsula are complaining about their high costs of production. There are four major poultry companies in that eastern shore region. Because of the high cost of feed grain there, they say it costs them about nine cents more to produce a chicken than the industry average. That adds up to about $52 million a year. The companies have asked local governments to consider lending some assistance.

Government assistance has been the redeemer of another industry in recent years â€" the dairy industry. But the cost of that support is rising as dairy farmers struggle with the immutable laws of supply and demand.


Dairy Producers Battle Basement Prices

To make up some of the difference, a provision in the 2002 Farm Bill established the Milk Income Loss Contract Program. Initially, the measure was allocated $1.3 billion for distribution over four years, but that money already is gone. USDA officials now project the total cost of the program at somewhere between $3 and $4 billion by the time the plan is terminated in 2005. The rule is automatically initiated when the market price drops below $16.94 per hundred weight. The current glut of milk has pressured the price to 20 year lows and the program in more than full swing.

The meager returns from the Milk Income Loss Contract Program, combined with the nationwide depression of prices, has spawned several plans designed to bolster the bottom line of U.S. dairy farmers. The newest idea is being fronted by the National Milk Producers Federation. Rolled out as Cooperatives Working Together, the federation hopes to reduce nationwide output by 1.2 billion pounds, about 7-tenths of one percent of total U.S. milk production. Reductions are to take place through herd retirements, marketing reductions and product exports. The program will be privately funded by a voluntary five cent per hundredweight contribution from the farmer.

This is not the only proposal on the table. Two previously implemented programs are receiving another look, as well. The New York Farm Bureau would like to see milk processors, once again, pay support prices. Meanwhile, New York Senator Charles Schumer has unveiled legislation to reinstate the much ballyhooed Northeast Dairy Compact.


Tags: agriculture dairy milk news