Will declining milk production head off support cuts?
SYRACUSE, N.Y. - If milk
production continues to decline at
its present rate, Chester W. Smith,
acting Northeast Dairy
Cooperative Federation, Inc.
(NEDCO) economist) predict
supply levels will be low enough to
head off two 50-cents cuts in dairy
support scheduled for next April
and July.
Smith said this could be the best
news yet for dairymen who have
been, up to now, suffering finan
cially from overpopulation.
Crediting the governments’
Dairy Diversion Program for the
good news, Smith said that
production has turned around
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2 market since last March.
He explained that in August,
1983, milk production was 7.8
percent above August of 1982.
However, Smith pointed out that
production has been steadily
declining since July of 1983.
By July 1984, production was 4.7
percent below a year earlier, he
said, the turning point from plus to
minus came in March, 1984, two
months after the Diversion
Program took effect. (See ac
companying chart.)
According to the NEDCO
economist, Order 2 fluid milk sales
this July were up over 1 percent
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from last year andr averaged
nearly 1 percent on the plus side
for the first seven months of 1984.
The Class II (milk-made products)
price has improved 24 cents per
hundredweight from January to
July, compared with last year, he
said.
Smith contends this is the result
of declining milk production and
increased demand for milk and
dairy products nationally.
“These trends have resulted in a
sharp drop in surplus butter,
cheese and nonfat dry milk being
sold to the government’ ’, he said.
He explained that the milk
equivalent of such sales from
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VLIUOCI 1) Uli UUgll ll,
1984 was 10 billion pounds, but that
this was 34 percent less than the
previous year.
“Sales to the government for the
week of August 18 this year were 76
percent under last year”, said
Smith.
He added, “if this low volume of
surplus continues for the rest of
this year, the annual level of dairy
surplus in prospect for next year
will be less than 5 billion pounds of
milk equivalent”.
This would provide the Secretary
oL Agriculture with a basis for not
cutting the dairy price support
level any further, said Smith.
Present legislation calls for a cut
of 50 cents in the support price on
April 1,1985, if Commodity Credit
Corporation (CCC) purchases of
dairy products are estimated to
exceed 6 billion pounds of milk
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equivalent during the following
year. Another 50 cents per hun
dredweight is scheduled for July 1,
1985, if the estimate exceeds 5
billion pounds.
Smith said the USDA is now
forecasting 1984 milk production at
135.5 billion pounds, down 5.5
billion from the record 140 billion
pound milk flow in 1983.
“It looks like the Diversion
Program is working to bring
supply in balance with demand”,
he said. “The cost of price support
will be down at least $1 billion,
compared with $2.4 billion last
year.”
Smith feels that even though this
year has forced much belt
tightening among dairymen, the
improved supply-demand outlook
points to a more favorable climate
for drafting reasonable dairy
provisions in the 1985 Farm Bill.
PRODUCER RECEIPTS OF MILK - ORDER 2
1983-84
1982-83
Pounds Change Change
995 +72 +6 5
958 +69 +7 8
920 +53 +6 1
935 +47 +5 3
895 +4O +4 7
957 +35 +3 8
976 +2l +2 2
896 +l2 +1 4
1012 - 5 -0 5
984
1048
996
950
1014
1075
1038
995
-0 2
-2 5
-4 0
-4 6
-20
-27
-42
-45
S-14