Local dairies will receive help

USDA will prop up prices for exports

By John Holland
jholland@modbee.com

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Hard-pressed dairy farmers got a boost Friday with the announcement that the federal government will subsidize exports of milk products.

The U.S. Department of Agriculture is activating its Dairy Export Incentive Program, which helps U.S. producers compete with the European Union's subsidized farmers.

The program could help reduce the surplus in dairy inventories and eventually improve raw milk prices on the farm, said Michael Marsh, chief executive officer at Western United Dairymen in Modesto.

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The aid will be especially useful in increasing exports to developing nations, including China, Vietnam and Indonesia, he said.

"This allows us at least to move in and compete in these markets that the Europeans have been moving into," Marsh said.

The dairy industry, the top farm sector in the Northern San Joaquin Valley and statewide, got hit with a sharp drop in farm milk prices to start the year. It is blamed mostly on contraction of foreign demand because of the recession.

Many farmers have found that their income is well below the cost of feeding, milking and other operations.

Under the aid program, last used in 2004, the USDA pays bonuses to exporters of U.S. dairy products. For example, Marsh said, the government might kick in a nickel per pound of butter so a U.S. product costing $1.25 a pound here could be sold on the world market at $1.20.

"This is a tremendous win for San Joaquin Valley dairies," said Rep. Dennis Cardoza, D-Merced, who had asked Agriculture Secretary Tom Vilsack to approve the aid. "This will significantly reduce the stark gap between revenue and expenditures for our struggling dairy operators."

Ray Souza, a Turlock-area farmer and president of Western United Dairymen, also praised Vilsack for the decision.

"This is the right time for our country to pursue a more aggressive trade policy," Souza said.

Vilsack said the Obama administration generally shuns protectionist measures, in keeping with trade agreements, but the dairy program is needed to counter EU subsidies.

Marsh said the export program is just part of the effort to get the dairy industry back to health. It includes a recent sell-off of cows to the beef market to reduce the milk supply, and increases in dairy products for federal nutrition programs.

Bee staff writer John Holland can be reached at jholland@modbee.com or 578-2385.