Bids are in on herd buyout
Best estimates indicate that f rom $5.00 to over $l5O per hun
nearly 12 percent of Penn- dredweight. In spite of what you
sylvama’s 14,000 commercial dairy may have heard) no one knows as
farms have submitted bids for the 0 f this writing, what the cut off bid
Dairy Termination Program w ill be but it’s fairly certain from
starting April 1 and lasting through the range in bids that may
September 1992. have called but fewer will be
Applications varied widely chosen
between counties in this area going jt may be that some producers
all the way from 20 percent in v i e Wed this more as a crap shoot
Lackawanna and Wyoming down than a diversion program but if
to 13 percent in Bradford and some f ee i they need over $lOO a
Susquehanna according to County hundred to leave dairying things
Extension Agent estimates. are ex tremely good or bad on some
However, bids varied even more f arms
widely than the number of par- q£ course this small sampling
ticipants across the state ranging
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tells us nothing much about the
success of the program because we
don’t know how many bids will be
accepted or, more importantly,
how much milk will be diverted.
We won’t have that information
until March 28 when ASCS in
Washington sends the contracts to
the county offices and they notify
the farmers. In the meantime, it’s
a real guessing game that anyone
can play not only on how many
farmers have applied nationally ~
but what proportion will be ac
cepted and finally how much milk
will be diverted.
When Congress passed the Farm
Security Act of 1985 they set a goal
of 12 billion pounds of milk to be
diverted by the Dairy Termination
Program. You’re producing now at
the rate of about 12.2 billionpounds
a month or 146 billion a year. The
next 50-cent cut in the support
price hinges on diverting 12 billion
pounds through the Dairy Ter
mination Program or cutting
government purchases to 5 billion
pounds of milk equivalent.
Right now it doesn’t seem like
eithei one will happen but keep
your eyes on Washington because
whether or not you get the 12 billion
pounds diverted will depend
largely on how much money ASCS
can spend on the program. The 40
cent assessment starting in April
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Lancaster Farming, Saturday, March 22,1986-A4l
and the 25 cents starting in
January may not be enough to
cover the costs of 12 billion pounds
at the bid prices we see so far.
Amendments
Many expected the Farm
Security Act to be amended but
few guessed that it would happen
so soon. Just two months later
Congress passed the “Food
Security Improvements Act of
1986” and sent it to the White
House for the President’s
signature today.
It includes many changes one of
which was to assess farmers up to
12 cents a hundred on all their milk
shipped between April and Sep
tember of this year. This in ad
dition to the 40 cent assessment
also starting April 1 for the Dairy
Termination Program.
It may be hard to believe but the
12 cent assessment was a blessing
to dairy farmers compared to what
the Commodity Credit Corporation
did to satisfy the Gramm-Rudman
bill. To get the 4.3 percent cut
required by Gramm-Rudman the
CCC had announced cuts in the
purchase prices of butter, powder
and cheese starting March 1 that
would have amounted to a 55 cent
cut m the support price and it
saved dairy farmers at least $3OO
million this year.
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If all this changing on dairy
products and price support wasn’t
bad enough to disrupt sales the
CCC ran out of money to buy
anything after March 4 and
Congress didn’t pass a sup
plemental appropriation bill for $5
billion until this week. And all of
this is happening to create un
certainties in the market at a time
approaching the annual spring
flush when we need everything
running smoothly to maintain as
much balance as possible.
CCC Purchases
The numbers have been of
ficially released by ASCS on
Commodity Credit Corporation
purchases of dairy products during
calendar 1985. In total it was 13.2
billion pounds of milk equivalent
purchased as butter powder and
cheese with a little evaporated
milk and infant formula.
The 13.2 billion pounds compares
to 8.6 billion last year for an in
crease of 53 percent. These pur
chases represented 9.4 percent of
all the milk marketed in 1985 and in
1984 it was 6.6 percent.
Purchases of butter, powder and
cheese totaled nearly 2 billion
pounds. Of that 629 million pounds
was cheese, including 33 million
pounds of mozzarella; 334 million
pounds of butter and 940 million
pounds of nonfat dry milk powder.
So you can see that with pur
chases of over 13 billion pounds of
milk equivalent last year and a
target of 2.5 billion pounds before
we can get an increase in the
support price we have a long way
to go in reducing production or
increasing demand.
Good News
The brightest spot in the whole
dairy industry is the growing in
crease in commercial sales. The
figures just released for last year
indicate an increase of 3.7 percent
in 1985 over 1984 which showed an
increase of 3.2 percent over 1983. If
those numbers seem small look at
it this way.
Commercial sales in 1983 were
just over 122 billion pounds and in
just two years they are now over
131 billion pounds an increase of 9
billion pounds. Another four or five
billion pound increase this year
could get you up to 135 billion
pounds. If you can get production
down to 140 billion you’ll be within
spitting distance of that magic 5
billion pounds sold to CCC that
means no more cuts in the support
price, according to the Farm
Security Act.
More and more that 15 cent
deduction for advertising and
promotions begins to look like
money in the bank in the near
future.
Order 2 Prices
You didn’t set any production
records in Order 2 in February but
your blend price of $11.84 was still
the lowest since 1979. The Min
nesota-Wisconsin price dropped
eight cents from January to $11.04
and your blend price went right
along with it. Eight cents under
last month adds up to $1.29 under
last February with nothing but
more cuts in sight.
Earlier I mentioned the cuts in
the purchase prices of butter,
powder and cheese for March that
is to be replaced by an assessment
of up to 12 cents in April on top of a
40 cent assessment for the Dairy
Termination Program. All that
adds up to prices this spring about
$1.65 less than last year. If the
Farm Security Act doesn’t get you
Gramm-Rudman will.