Pulse Price Report: USDA Bails Out Dairy Producers

Last week, the United States Department of Agriculture (USDA) announced $11.2 million in payouts to dairy farmers that are suffering from low milk prices. Farmers are making 40 percent less income from milk products than they were two years ago when milk prices were at record highs.

“We understand the nation’s dairy producers are experiencing challenges due to market conditions,” said Agriculture Secretary Tom Vilsack in a press release. “MPP-Dairy (Margin Protection Program for Dairy) payments are part of a robust, comprehensive farm safety net that help to provide dairy producing families with greater peace of mind during tough times.”

The MPP-Dairy program was included in the 2014 Farm Bill and, this year, Wisconsin is getting the biggest payout.

There are 1,465 dairy producers in the state that are receiving $2,832,010 in government assistance, the highest in the nation.

For the life of the existing Farm Bill, the program functions like insurance. Farmers sign up and pay a premium. If the difference between dairy prices and the cost of feed dips below a farmer’s selected level of coverage, the government will step in and make up some of that cost.

Wisconsin Senator Tammy Baldwin was one of 60 bipartisan legislators that called on the USDA to offer assistance to dairy producers.

“Wisconsin dairy farmers work hard every day moving our economy forward, so we need to do everything we can to reward their hard work by giving them a fair shot at getting ahead,” Baldwin said. “Keeping our economy strong means ensuring our rural communities and farms make it through this challenging time for the dairy industry.”

But the assistance follows the assumption that the challenging time will come to an end before dairy producers are forced to close down their operations.

Americans drink 37 percent less milk today than they did in 1970. Most of that decline is found in the younger demographic, between two and 19 years old. Unless that youth gets a taste for milk as they grow older, consumption is expected to continue to decline.

While fluid milk consumption is falling, consumption of other milk products such as cheese is on the rise, which may be the savior for milk prices.

Crop prices (Aug. 8)

Rio Creek Feed Mill – Algoma

Fox River Valley Ethanol – Green Bay

Basis: The difference between the local cash price for a commodity and the Chicago cash price (where the Board of Trade sets national futures price).

Gas Price Averages

United States: $2.12

United States one year ago: $2.60

Wisconsin: $2.18

Wisconsin one year ago: $2.58

Northern Door: $2.26

Sturgeon Bay: $2.30

Other Commodities

Gold: $1,343.40/troy ounce

Silver: $19.88/troy ounce

Oil: $42.94/barrel

Sources: aaa.com, agweb.com, gasbuddy.com, cnn.money, USDA