Declining bar chart
April 8, 2020

Will Regionalization Be Needed In Dairy Crisis Plan?

 |  By: Jim Dickrell

The ink was hardly dry on the national Milk Crisis Plan submitted to USDA by the National Milk Producers Federation (NMPF) and the International Dairy Foods Association when one major “flaw” was pointed out by a Midwest-based dairy group.

The main thrust of the plan would ask dairy farmers to cut their production 10% from a March 2020 baseline April through September. This voluntary reduction program would then pay $3 per cwt on the remaining 90% through September should the average Class III/IV price stay below $16.

The concern: The 10% rollback in milk production to qualify for government support would most heavily fall on dairy farmers in the northern half of the country over this summer. Cows in the southern half naturally produce much less milk over the summer months due to heat stress and calving patterns geared to produce milk over the winter months.

“Unfortunately, the arbitrary March benchmark will not work,” says Laurie Fischer, CEO of the American Dairy Coalition (ADC). “For the dairy industry to have a meaningful and market-effective impact, production needs a different baseline—it must be seasonally adjusted and region specific.”

Fischer points out that milk production in Florida naturally falls 11.3% April through September compared to a March baseline, using 2019 USDA National Agricultural Statistic Service data. Arizona production declines 10.1%; California’s, -5.5%, Texas, -3.3%.  In contrast, Idaho’s production actually increases 1.8% over the same period, while production in New York drops only 0.7%, in Wisconsin, -0.8%, and South Dakota, -0.1%.

“A seasonally-adjusted, market-specific milk reduction—which takes into account the summer downturn and then trims dairy production beyond it—will prove far more effective in realigning farm supply with current consumer demand,” says Fischer.

Jim Mulhern, CEO and president of NMPF, responded to ADC’s concern this way: “The house is on fire. Let’s make sure we get the fire trucks here first. We need [USDA] Secretary Perdue to understand and help address the dire needs of our industry as a result of this pandemic. Once we have that, the specifics of any approach will evolve as they always do.”

For more on the proposed dairy industry’s Milk Crisis Plan, click here.