Testimony before the House Ag Subcommittee on Livestock and Dairy today was typical of such efforts: Full agreement that there is a problem; no consensus on solutions.
James Miller, Under Secretary of Agriculture, testified that U.S. dairy farmers could see cash receipts fall to $23 billion this year, down from an average of $35 billion in 2007 and 2008. Net cash income had already fallen some 40% in 2008 because of high feed prices.
The primary reason for the sharp decline in milk prices, from $18 last year to less than $12 this year, are exports. USDA projects the value of U.S. dairy exports will decline some 40% this year, from $4 billion last year to $2.3 billion in 2009. Miller says the reduced sales are the result of the global recession, European Union dairy export subsidies and the stronger value of the dollar.
As a result of the cost-price squeeze, USDA estimates that cow numbers will average 138,000 head fewer this year than last. By December 2010, U.S. cow numbers could decline to 8.89 million head.
Milk price recovery will come slowly. USDA is projecting an all-milk price of just $11.60 for the third quarter of 2009, and $13.10 for the fourth quarter. For 2010, it is projecting an all-milk price of $15.60.
There was little agreement among those testifying before the committee as to what should be done. Tom Wakefield, a Pennsylvania dairy producer and member of the National Milk Producers Federation (NMPF), reiterated NMPF's call for increase dairy price support levels slightly. NMPF has called for raising the Commodity Credit Corporation purchase price temporarily for cheese blocks from $1.13/lb. to $1.19; cheese blocks from $1.10 to $1.16 and non-fat dry milk form 80¢/lb to 84¢. Such increases would prevent the loss of some $235 million in the last half of 2009.
Brad Bouma, a Texas dairy producer who is president of Select Milk Producers, was skeptical anything could be done short term to alleviate the crisis. "As serious as this economic situation is, and it is very serious, there is little that can be done now to alleviate it. It simply must pass,” he says. But he adds that the crisis has shown the need for better risk management by dairy producers.
The Holstein Association's supply management plan was also mentioned by several speakers. But more questions must first be answered before producers pursue legislation to implement it, notes Ray Souza, President of the Board of Director of Western United Dairymen. And Bouma's group flatly opposes supply management.
If there was one area of agreement, it was that the increase in the importation of milk protein concentrates is not the reason for the milk price crisis. USDA's Miller says MPC imports are up about 3% in the first five months of 2009. But all such protein imports—MPCs, casein and caseinates are down 16.7%. MPCs, says Miller, are not a significant cause of the current price crisis.
NMPF's Wakefield agrees, saying "imports are not the cause of the problems we are facing. Stepping blindly back from active engagement in trade and from the global market would do more to harm the future prospects for our industry than to help them,” he says.
For opening statements from today's presenters, go to: agriculture.house.gov/hearings/statements.html