Dairy Farmers to Get $350 Million in Additional Aid

By:  Lauren Etter
Wall Street Journal

Struggling dairy farmers will receive a $350 million infusion of cash from the government, but some worry the additional aid won't be enough to pull them through the dairy industry's worst economic storm in three decades.

President Barack Obama on Wednesday signed legislation granting the emergency aid to farmers, who are facing a price-depressing glut of milk combined with a slowdown in exports. Milk prices have dropped to about $11 for every hundred pounds of milk this year, down from $19 last year.

While consumers have benefited some in the form of lower retail milk prices, many dairy farmers are flailing. Farmers have already sent to slaughter hundreds of thousands of cows in the hope that removing the animals from the market would reduce milk supply and boost prices.

The dairy aid was included in an agriculture appropriations bill, under an amendment sponsored by Sen. Bernard Sanders, a Vermont independent.

Of the $350 million, $60 million will be used to purchase cheese and other dairy products for food banks and nutrition programs. The remainder will fund direct support to dairy farmers.

This is the latest step by the government to help the dairy industry. In July, the Department of Agriculture said it was raising the price it paid for cheese and milk under a government purchasing program, which it said would increase dairy farmers' revenue by $243 million this year. The department also increased efforts to send nonfat dry milk overseas.

Part of the problem is that it is hard to shut off the nation's milk spigot. Dairy cows can't be turned on and off. And many farmers have preferred to keep milking as many animals as possible to spread out their high fixed costs. Those factors have contributed to the decline in wholesale, and retail, milk prices.

That is why some farmers say more needs to be done. The National Family Farm Coalition, a Washington-based farm-advocacy group, is asking for an overhaul of the milk-pricing system, which is based on a complex Depression-era regime administered by the federal government.

The coalition supports an idea that would keep prices stable by creating an oversight entity to manage the amount of milk a farmer can produce.

"While we appreciate this money, it won't be enough though to keep farms from going broke," the coalition said in a statement.

As dairy farmers continue to cope with low milk prices, the dairy-processing industry is coming under increased scrutiny by lawmakers and others who say some large dairy companies that make everything from ice cream to yogurt are engaging in anticompetitive conduct. Those companies have denied wrongdoing.

Over the past few months, dairy farmers have been meeting with officials at the Department of Justice to discuss competition and consolidation in the industry. Last month, Vermont Sen. Patrick Leahy, a Democrat, and Mr. Sanders held a hearing in St. Albans, Vt., on milk pricing. They questioned Assistant Attorney General Christine Varney about industry consolidation. She said her department would look into the matter.