According to data reported by the National Farmers Union (NFU), the average dairy farm has shown a positive net income only once in the last decade, in 2014. In 2018, the average value of production exceeded the total cost of producing each hundredweight of milk in only one state, California, and nationwide, dairy farmers lost an average of $3.21 per hundredweight of milk produced. For 2019, total dairy production is expected to increase modestly over 2018, by less than 0.3 percent, and the average all-milk price is expected to increase as well, from $16.26/cwt in 2018 to $18.40/cwt. While the projected 13 percent increase in price for this year is welcome news for U.S. dairy farmers, that level still falls below the average total cost of production for farmers in most of the country.
But she had a very different take on the international issues involved:
This situation is largely a result of a persistent mismatch between the supply of dairy products and the demand for them, and is not isolated to the U.S. domestic market. Within the European Union, low dairy prices prompted some Italian, German, and Belgian producers to dump their product in protest during the summer of 2019. The combination of low prices and a severe drought in 2018 has pushed many Australian dairy operations to the brink of collapse. The farmer-owned Fonterra dairy cooperative, serving both Australia and New Zealand farmers, has seen its share values decline by about 50 percent since the beginning of 2018.
Look – we can criticize Trump’s stupid trade war for a lot of things but low milk prices are being driven by other factors:
In many ways, the current supply/demand conditions in the global dairy market, at least in developed countries, seem to represent an example of the “treadmill theory of technology adoption” in agriculture, posited by Dr. Willard Cochran (University of Minnesota) in the 1950s. Farmers adopt new technologies to reduce their costs, but if most farmers do the same thing, it often leads to over-production of that commodity. Prices drop, so they end up generating less revenue.
So what has been the U.S. policy response?
In the 2018 farm bill, enacted late in the year, Congress tried to respond to the dairy crisis by making significant changes to the dairy safety net system. Under the new legislation, Dairy producers will be able to cover their production with both the Dairy Margin Coverage (DMC) program (the replacement for the Margin Protection Program) and Livestock Gross Margin insurance for dairy offered under the crop insurance program. Dairy producers will be eligible to claim a refund of some of the premiums they paid under the Margin Protection Program, a benefit estimated to cost $58 million for all producers. Dairy farmers who commit to maintaining the same DMC coverage level over the lifetime of the farm bill will receive a 25 percent discount on their premiums. Congress set the stage for bolstering these programs with provisions in the Bipartisan Budget Act of 2018 (passed in February of 2018), with policy changes that were projected to cost $1.1 billion over and above baseline spending levels for the period of 2018 through 2028. Under the DMC program, 37,468 dairy operations were enrolled for 2019, accounting for 85 percent of all operations. Payouts under the program for 2019 have totaled $306 million to date. Enrollment is now open for 2020 participation in the program, and the enrollment period ends on December 13, 2019. There were also 1,237 livestock gross margin insurance policies sold for dairy cattle operations in 2019, covering $128 million worth of liability.
As consumers, we are enjoying low milk prices but then we are paying a bit more in taxes. This link has more on this Dairy Margin Coverage program.
PGL:
There still exists a vast number of people and children who go hungry due to a lack of income and to which schools have not responded to other than stopping lunches if children are not current in payment. I am sure we can find a way to use excess milk, cheese , and other dairy products in the US as well as to other countries.
The economics make sense as to why this is occurring and it has been applied to other segments of agriculture as well. You make too much, prices go down. There are other and under used outlets for food.
Run75441 – agree absolutely. Note – I updated my original post to include this link to someone who is forecasting that China will be importing a lot more in dairy products (assuming Trump’s trade war does not screw dairy farmers too):
https://www.researchandmarkets.com/research/46qccx/china_10_65_bn?w=5
Related to Run75441’s point:
https://www.usatoday.com/story/news/education/2019/10/27/school-lunch-free-trump-food-stamp/2457920001/
‘Sitting in class hungry’: Schools wary of Trump plan to end free school lunches for some
“Nearly 1 million low-income students would lose automatic access to free school lunches under a proposal from President Donald Trump’s administration that aims to limit the number of people receiving federal food stamps. And advocates say even more could lose free meals as the implications of the cuts ripple across low-income schools. But the Trump administration says those concerns are overblown.”
Not overblown. Trump is a disgusting uncaring pathetic excuse for a national leader.
PGL:
Trump is a product everyday Republicans, those who are fearful that someone else is getting something they can get such as food, healthcare, better schools, decent living accommodations, sustainable wages, etc. They look to many as not having earned it when they and many already standing on first base thinking this is normal. We have the resources to uplift the many and we argue over whether they are deserving of it.
First, we need to outlaw margarine. Or, make it pink in color.
Second, we need to get rid of the “Milk Boards”.
Third, why does the “milk problem” remind me of Soviet Union?
‘why does the “milk problem” remind me of Soviet Union?’
The EU Common Agriculture Policy put price floors on dairy but when that butter mountain got really large, the policy shifted to quotas on dairy farmers. Of course now that China is importing a lot of dairy, there is a push to relax these quotas.
Maybe they should put Putin in charge!