Policy Reform Proposals Will Not Stop U.S. Dairy Farm Consolidation, Processors Say

February 29, 2012 07:59 PM

The largest 1,750 dairy farms now supply more than 50% of the U.S. milk supply, according to a new report by USDA. One-third of the farms, about 19,400 that have fewer than 30 cows, produce only 1% of the milk supply.

The report, "Farms, Land in Farms and Livestock Operations 2011," shows that while dairy farms with fewer than 100 cows have declined in numbers, farms with more than 1,000 cows are increasing in size, numbers and percentage of milk production.
"No one should be surprised by these numbers, as the decline of small farms and the trend to larger dairy farms has been going on for decades in the dairy industry," said Jerry Slominski, senior vice president of legislative affairs and economic policy for the International Dairy Foods Association (IDFA). "What will surprise most people is that the bill endorsed by the House and Senate agriculture leadership –- Democrats and Republicans –- will actually increase the rate at which small farms are going out of business."

A report released last fall by renowned economists supports Slominski's assessment. Charles Nicholson of the Department of Agribusiness, Cal Poly San Luis Obispo, and Mark Stephenson of the Center for Dairy Profitability, University of Wisconsin, published "Farm-Level Financial Impacts of the Dairy Security Act of 2011 (H.R. 3062)," and concluded, "While no one can require that farms of any size enroll in the new program, analysis indicates that the impact of the reduced payments under supply management [as required by the act] will have a harsher impact on smaller farms."
"It’s pretty easy to see how the small farms will get squeezed out of business faster by this new government program," Slominski said. "The solution is to offer dairy farmers the same opportunity for catastrophic and revenue insurance that is being offered to other farmers. Congress expects to spend $90 billion over the next 10 years on such insurance programs for other commodities but refuses to budget any of this for dairy farmers."
The Dairy Security Act, H.R. 3062, introduced by Rep. Collin Peterson (D-Minn.), requires that dairy farmers who participate in a new subsidy program be subject to reduced milk payments when the margin between feed costs and milk prices decreases significantly below average. The Congressional Budget Office estimates that 60% of dairy farmers will participate in the new subsidy program. As shown by the new statistics from USDA, the remaining 40% could produce nearly 90% of the milk supply.
The International Dairy Foods Association (IDFA), Washington, D.C., represents the nation's dairy manufacturing and marketing industries and their suppliers, with a membership of 550 companies representing a $110 billion a year industry. IDFA is composed of three constituent organizations: the Milk Industry Foundation (MIF), the National Cheese Institute (NCI) and the International Ice Cream Association (IICA). IDFA's 220 dairy processing members run more than 600 plant operations, and range from large multi-national organizations to single-plant companies. Together they represent more than 85% of the milk, cultured products, cheese and frozen desserts produced and marketed in the United States. IDFA can be found online at www.idfa.org.

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