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The struggling U.S. dairy industry must be restructured to avoid cycles of boom and bust, Agriculture Secretary Tom Vilsack said Monday, less than a week after Congress announced a $350 million dairy bailout.
Dairy farmers benefited in recent years from higher milk prices and growing demand in countries such as China. But demand fell off with the economic downturn, and wholesale milk prices began plummeting last fall. At the same time, feed and other costs remained high.
Many farmers now say they can't sell their milk for what it costs to produce.
Mike Kohler, executive director of Dairy Producers of Utah, said farmers are beginning to realize that boom-and-bust cycles can be avoided if a voluntary or mandatory production system is implemented. He doubts that the bailout payments will do much to help large Western dairies because there's a $3 million cap on payments.
"Frankly, this program probably is postponing the inevitable," he said. "There are some marginal operations that simply need to get out of the business."
For his part, Vilsack said during a visit to South Dakota: "I think really what will be next in line is a longer-term discussion about whether or not we need to make structural changes in the way the dairy industry is operated so we no longer have these rather stark contrasts between boom and bust."
Vilsack said he would like to get federal aid into farmers' hands as soon as possible. Under the
An advisory committee will recommend how to spend the money, Vilsack said.
"The general principle for me is to get as much money in the pockets of producers as quickly as I can," he told the 300 farmers and ranchers gathered in a farm building in northern South Dakota.
The secretary also said he expects the Agriculture Department to look at its price support and marketing programs to see if changes can be made to help stabilize prices.
He noted dairy farmers have been selling some cows to help reduce the nation's milk glut and bring production more in line with demand. He said he's glad to see the sales managed in a way that does not harm beef prices.
The National Milk Producers Federation uses money contributed by its members to buy out some farmers' herds and have them slaughtered to reduce the number of dairy cows nationwide. The Dairy Farmers of America also supports in the program, which has taken tens of thousands of cows out of production in the past year alone.
