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Supply Mgt Programme Will Hurt Small Dairy Farmers

05 March 2012

US - The largest 1,750 dairy farms now supply more than 50 per cent of the US milk supply, according to a new report by the US Department of Agriculture. One third of the farms, about 19,400 that have fewer than 30 cows, produce only one per cent of the milk supply.

The report, “Farms, Land in Farms and Livestock Operations 2011,” shows that while dairy farms with fewer than 100 cows have declined in numbers, larger farms with more than 1,000 cows are increasing in size, numbers and percentage of milk production.

“No one should be surprised by these numbers as the decline of small farms and the trend to larger dairy farms has been going on for decades in the dairy industry,” said Jerry Slominski, IDFA senior vice president of legislative affairs and economic policy.

“What will surprise most people is that the bill endorsed by the House and Senate agriculture leadership – Democrats and Republicans – will actually increase the rate at which small farms are going out of business."

A report released last fall by renowned economists supports Mr Slominski's assessment. Charles Nicholson of the Department of Agribusiness, Cal Poly San Luis Obispo, and Mark Stephenson of the Center for Dairy Profitability, University of Wisconsin, published "Farm-Level Financial Impacts of the Dairy Security Act of 2011 (H.R. 3062)," and concluded, "While no one can require that farms of any size enroll in the new programme, analysis indicates that the impact of the reduced payments under supply management [as required by the act] will have a harsher impact on smaller farms."

“It’s pretty easy to see how the small farms will get squeezed out of business faster by this new government programme,” said Mr Slominski.

“The solution is to offer dairy farmers the same opportunity for catastrophic and revenue insurance that is being offered to other farmers. Congress expects to spend $90 billion over the next 10 years on such insurance programmes for other commodities but refuses to budget any of this for dairy farmers."

The Dairy Security Act, H.R. 3062, as introduced by Rep. Collin Peterson (D-MN), requires dairy farmers who participate in a new subsidy program be subject to reduced milk payments when the margin between feed costs and milk prices decreases significantly below average. The Congressional Budget Office estimates that 60 per cent of dairy farmers will participate in the new subsidy programme. As shown by the new statistics from USDA, the remaining 40 per cent could produce nearly 90 per cent of the milk supply.

Further Reading

- You can view the full report by clicking here.

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