Agriculture Secretary Tom Vilsack signaled Wednesday that he may take measures to put more dairy products in federal nutrition programs, possibly easing the blow of falling milk prices on dairy farmers.
But he was less enthusiastic about boosting exports, which could lead to complaints from U.S. trade partners.
In a press conference, Mr. Vilsack said he would not comment about specific ideas he is contemplating, but that the recent fall in milk prices is one of his top concerns and can be addressed by reducing an oversupply of milk, particularly in the West.
“One of the keys is to look at the supply, the oversupply we have today,” Mr. Vilsack said.
Mr. Vilsack’s comments may satisfy some of the demands from lawmakers, including Rep. John M. McHugh, R-Pierrepont Manor, and Sens. Charles E. Schumer and Kirsten E. Gillibrand, D-N.Y., who have urged more dairy products for food programs.
But they also have urged more exports, especially through a little-used federal subsidy called the Dairy Export Incentive Program. The government has narrowed that program considerably; it often raises free-trade complaints from other countries.
Mr. Vilsack’s emphasis on an oversupply of milk, while mirroring what many economists say, runs afoul of farm groups that say the real issue in the dairy industry is manipulation of the small wholesale market that helps determine minimum federal milk prices around the country.
Mr. Vilsack cited “tremendous demand” in federal food programs and at food banks around the country, suggesting that supplying those programs with more dairy products could soften the blow for farmers.
Attacking deep price declines by addressing an oversupply can work “if we’re cautious about it,” Mr. Vilsack said.
The National Family Farm Coalition has called on the government to stop using the Chicago Mercantile Exchange as a benchmark for the minimum prices plants must pay farmers. The market is vulnerable to manipulation, the U.S. Government Accountability Office has reported, and last year the nation’s biggest dairy farmer bargaining cooperative, Dairy Farmers of America, agreed to pay a $12 million penalty to settle charges that three executives used the market to manipulate milk prices.
The coalition has been pressing lawmakers to question whether the nation really faces an oversupply, or a flawed system for setting and reporting milk prices.
One idea that appears to be going nowhere is to use the federal economic stimulus to help dairy farmers, perhaps by increasing the slaughter of dairy herds. Advocates for that idea discussed a federal loan guarantee program to boost a program run by dairy cooperatives that pays farmers to “retire” their herds.
The proposal was shot down by Rep. David R. Obey, D-Wis., chairman of the House Appropriations Committee, and never gained much steam in the Senate.
The USDA set the minimum base price for beverage-class milk at $10.72 per 100 pounds for February, a $5 drop in one month and nearly 50 percent lower than a year ago.