Ag. Secretary: Dairy Industry Must Restructure

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.

"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 currently operated so we no longer have these rather stark contrasts between boom and bust," Vilsack said during a visit to South Dakota.

Vilsack said he would like to get federal aid into farmers' hands as soon as possible. Under the deal announced last week, his department is responsible for distributing $290 million in direct support for dairy farmers. The other $60 million will cover purchases of surplus cheese and other dairy products to help raise prices. Food banks and other nutrition programs will get the goods.

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.

"We need to figure out what changes, if any, we need to make to our support programs, to our marketing programs, to who's included in those programs, to see if there is any way we can create greater stability," Vilsack said.

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.

"We've seen a reduction of the dairy herds over the course of the last six or seven months," Vilsack said. "But it's been done in a controlled way so as not to distort the cattle market, which I appreciate and I'm sure the cattle industry appreciates."

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.

Vilsack told the farmers and ranchers that Congress and USDA officials recognize the dairy industry isn't the only one hurting. He said the USDA is trying to help hog farmers by buying additional pork for programs that feed poor people, encouraging other federal agencies to buy more pork, and promoting the sale of pork to other nations.