Dairy industry: Cuts could lead to higher prices

From: The Chippewa Herald

By MIKE TIGHE

LA CROSSE — The dairy industry could suffer devastating effects and consumers could wind up paying more for milk after sequestration cuts led to the elimination of a key federal monthly milk production report used to set dairy prices.

Or, according to some dairy experts, nothing significant could change.

Dairy farmers use the U.S. Department of Agriculture reports to determine production, and milk processors and brokers use the information to judge and set the market. The reports were cut as part of federal sequestration measures.

“Not having the reports can have significant impacts because there is no way of knowing what the supply will be,” said Greg Bussler, a Wisconsin statistician for the USDA’s National Agricultural Statistics Service.

Eliminating the reports leaves farmers and processors “operating in the dark,” Bussler said.

Consumers ultimately could pay more as processors try to ensure profit in an information vacuum, he said.

Florida-based dairy analyst Jerry Dryer voiced alarm, saying, “It’s a huge, huge business, and (the federal government) is screwing with it in a big way. It’s a real mess. I can’t emphasize that enough.”

But Darin Von Ruden, a Westby organic dairy farmer who is president of the Wisconsin Farmers Union, isn’t so worried.

“We’ve counted on the federal government for the reports,” he said, “but with computers and technology we have now, we should be able to” pull figures together.

“It will take good communication between major retailers and processors to sit down and figure out a way,” Von Ruden said.

Although consumer costs could rise at the same time producer prices fall, “only time will tell,” he said.

Mark Stephenson, director of UW-Madison’s Center for Dairy Profitability, said any price hikes probably would be small.

“In fact, it’s probably going to be hard to measure,” he said.

Federal milk marketing orders, which produce data used to set milk prices in regions across the country, can be used as a temporary source until the report is reinstated when the next fiscal year begins Oct. 1, Stephenson said.

But if the USDA decides to eliminate the report permanently, the dairy industry will need a more stable substitute, he said.

Australia deregulated its dairy industry years ago and ended all governmental support, including production reports, Stephenson said. The dairy industry there created a private program that provides the data it needs.

Officials with the National Agricultural Statistics Service said the service would support continuing the milk and other reports that have been eliminated if another entity provided the funding.

That prompted Wisconsin’s Department of Agriculture, Trade and Consumer Protection to explore the possibility of finding the money, said Jim Dick, spokesman for the state agency.

“Part of our approach is to wait and see what happens, and whether it will become permanent” or be lifted, as the threatened furlough of meat inspectors was under a bill Congress has sent to President Barack Obama, Dick said.

The potential for problems within the dairy industry grows the longer it goes without data, said Brian Gould, an agriculture and applied economics professor at the University of Wisconsin-Madison.

A long absence of milk production data could lead to fewer plant expansions and equipment purchases, Gould said.

“The further we get from the last point of information, the more uncertainty there will be,” he said. “Therefore, the (negative) impact on investments will increase.“

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