A voluntary, producer-funded program aimed at supporting milk prices through herd retirement and other means will only go so far in helping the dairy industry out of its current slump, says Iowa Farm Bureau President Craig Lang.
Testifying on behalf of the American Farm Bureau Federation at a recent congressional hearing, Lang said his organization applauds the effort undertaken by Cooperatives Working Together (CWT) so far. “The latest removal of 100,000 cows unfortunately only represents about 1% of the U.S. herd. Our economists believe another 3% reduction in cow herd numbers for an extended period of time will be required before dairy prices are likely to significantly rebound.”
A major obstacle, according to Lang: The program may not have the funds necessary to reduce the U.S. herd enough to boost milk prices back to a profitable level. This may mean the only option is for more farmers to sell herds on the open market. “Eventually, that culling of the U.S. herd will reduce milk supply and boost prices,” said Lang, partner in a dairy with his father, brother and son. “Cull-cow markets have already softened considerably and are making this a difficult decision for farmers.”
While fewer dairy cows would be useful in increasing milk prices to farmers, Lang said Farm Bureau is “adamantly opposed” to a federal dairy herd buyout program similar to those used in the past because such programs have had negative impacts on the beef industry.
Lang also noted that USDA expects a brighter economic picture around the corner, forecasting the all-milk price to average $11.60/cwt in the third quarter of 2009 and $13.10/cwt in the fourth quarter. For all of 2010, USDA is projecting an all-milk price of $15.30/cwt.
“We are working our way out of this severe crisis and must let the dairy sector return to a supply/demand balance as soon as possible,” he said.