BY BRIDGET MACDONALD – MEDILL NEWS SERVICE
For the first time in nearly two years, the U.S. Department of Agriculture will compensate dairy farmers for low milk prices by providing payments through the Milk Income Loss Contract program.
Beginning this week, the USDA expects to dole out an estimated $150 million to pay for milk marketed in February. According to Jonathan Groveman of the USDA, the agency last issued milk payouts for March 2007.
Secretary of Agriculture Tom Vilsack said the payments will provide financial assistance to producers as well as a boost to local economies.
“President Obama understands that dairy farmers are struggling during these tough economic times,” Vilsack said Wednesday in a press release.
When the price for milk drops below the industry benchmark, the government makes up the difference for producers who are enrolled in the program. The trigger price for February milk, adjusted for feed costs, was $17.33, amounting to a payment rate of $1.51 per hundred pounds of milk, or cwt.
However, there is some concern that the payments will not provide adequate support to producers in the Midwest, where feed range from $8.63 to $9.31 per cwt, at least 12 percent higher than the USDA’s estimate of $7.73 per cwt.
But Jim Fraley of the Illinois Milk Producers’ Association said the program is a “godsend” for Illinois dairy. While the state ranks 20th in the country in milk production, it ranks 12th for government milk payments. “The reason for that is we have smaller producers while states with larger producers max out on the payments sooner,” Fraley said.
Scherrie Giamanco, the price support program chief for the Illinois State Farm Service Agency, said the recent drop in dairy prices is significant. “As you noticed from the grocery store, the price of milk has been going down,” she said, adding, “Last year, [prices] didn’t go down at all.”
Giamanco said producers are only paid for milk they marketed, not for their total production. But as long as they present a record of marketed milk, she said, “We can make payments through the end of the year.”