The National Milk Producers Federation (NMPF) went to court today in Chicago to prevent the U.S. Department of Agriculture from undermining the dairy price support program by selling nonfat dry milk powder at levels that will reduce farmers’ milk checks.
NMPF is seeking a Temporary Restraining Order to stop the USDA from using a private, third-party company to resell milk powder at levels below what the law specifies.
At issue is an arrangement the USDA has with a firm called The Seam, under which Seam, starting this week, will auction off surplus milk powder given to it by the government. Under the arrangement, the Seam is not required to sell the milk powder to commercial clients at the minimum resale price of 88 cents per pound, as specified in the Farm Bill. Because of this, the auction will result in lower nonfat dry milk prices, and because farmers’ prices reflect commercial dairy product prices, it will reduce dairy producer income.
“We strongly believe that USDA’s action will circumvent the newly-adopted 2008 Farm Bill, which says that under the Dairy Price Support Program, the USDA cannot sell nonfat dry milk stocks at less than 110% of the price at which it purchased the product,” said Jerry Kozak, President and CEO of NMPF. Kozak noted that the DPSP directs the USDA to buy powder at 80 cents/pound, and specifies that the USDA cannot sell it back to the market at less than 88 cents/lb., in order to keep prices from being further driven down.
“The purpose of the price support program is to have the government provide a basic safety net when prices are low, as they are now,” Kozak said. “The USDA is trying an end-run around statutory rules that are designed to keep prices stabilized.” Up to 20 million pounds of nonfat milk powder are scheduled to be auctioned this week, and if those sales are at levels of between 80 and 85 cents/lb., which is the current market price, it could reduce farm-level income by $57 million over the next year, Kozak said.
Kozak said that NMPF asked USDA executives last week to postpone the milk powder auction, but USDA did not respond to that request. As a result, NMPF has filed suit in Chicago today to suspend the auction.
“Congress just passed the Farm Bill a few months ago, and that law clearly states that the Dairy Price Support Program must continue to function as a safety net for farmers’ prices,” Kozak said. “This third-party auction concept is a slap in the face to Congress, and to America’s dairy farmers, at a time when farm prices are dropping,” Kozak said.