Experts: USDA buy won't relieve dairy oversupply

Experts say the federal government’s purchase of 11 million pounds of cheese might put a few more dollars in farmers’ pockets, but the buy won’t help much amid the biggest cheese glut in 30 years. By JON O'CONNELL.
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The U.S. Department of Agriculture recently announced it would spend $20 million on cheese from private inventories to help shrink a massive oversupply and help struggling dairy farmers.
The department will donate the cheese to food banks and food pantries across the country.
However, the purchase is as much symbolic as anything else, said Mark Stephenson, Ph.D., a University of Wisconsin dairy economist.
“The amount that you could purchase of cheese at $20 million is about equal to the amount of that we added to our supply of cheese stocks in the last month,” he said. “It’s just bringing them back down to where they were the month before.”
A complex set of market factors including a strong U.S. dollar and floundering global demand for U.S. milk product exports drove down the price of milk to near-record lows, and farmers across the nation lost money on every gallon.
Low milk prices this summer have hacked away at farmers’ monthly dairy cooperative milk checks as the market cycle slumped into a persistent trough from which experts say it will take longer than usual to bounce back.
Pennsylvania ranks fifth in milk produced among U.S. dairy states and has the second most dairy farms thanks to its abundant small, independent family farms.
The government purchase could have one ancillary benefit — investors betting on dairy futures gain a little confidence.
“Any form of positive action can have a reaction from the markets,” said Mark O’Neill, a spokesman for the Pennsylvania Farm Bureau. He noted that milk futures stocks rallied immediately following the announcement.
Still, one local lobbyist agreed the buy does little more than a Band-Aid.
At the end of March, commercial cold storage freezers held nearly 1.2 billion pounds of cheese, according to the Wall Street Journal.
“And they want to take 11 million pounds off?” said an incredulous Arden Tewksbury, manager of the Progressive Agriculture Organization in Meshoppen.
The bigger problem: the USDA needs congressional authority to set a pricing formula to reign in the cost of production, he said. Farmers also need a framework with which to control their inventories, he said.
“It’s a step, you know, but it’s not going to solve the problem,” he said of the purchase. “It’s probably going to help our needy people more than it’s going to help our dairy farmers.”
In this fiscal year, Oct. 1, 2015, to Sept. 30, 2016, the government spent $312.9 million to purchase surplus food commodities. The department plans to buy cheddar cheese through a bidding process with contracts awarded later this month.
“We understand that the nation’s dairy producers are experiencing challenges due to market conditions and that food banks continue to see strong demand for assistance,” USDA Secretary Tom Vilsack said in a news release.
The Farm Bureau had recommended the department buy 28 million pounds for $50 million, but that wasn’t possible as the federal government approaches the end of its fiscal year.
This purchase could help set a precedent, Mr. O’Neill said, and dairy farmers may see more purchasing this fiscal year.
 
Source:  The Times Tribune
Link: http://thetimes-tribune.com/news/business/experts-usda-buy-won-t-relieve-dairy-oversupply-1.2098358
 

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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