Interest in milk pricing could help US dairy industry

Recovery for the US dairy industry has not looked as encouraging as producers hoped, but interest in the industry and initiatives to change it could stimulate some momentum.

Mike Schutz, a Purdue University Extension dairy specialist, said the industry's current state does not look as positive as it did two months ago.

"2009 was a miserable year for milk prices," he said. "They have been this low before, but not for this long in recent years, and feed prices are twice as high as they have been in other downturns. It has just been a really depressing time for dairy farmers."

The industry was hopeful that milk prices would increase as 2010 began, and prices did improve. However, they have fallen recently due to growing cheese inventories and an unexpectedly strong supply of replacement heifers.

Milk Income Loss Contract payments, which support farmers when milk prices are low and feed prices are high, may again be paid from April to July.

Schutz said that while there is not a single answer to help the situation, dairy producers should continue with good management and financial practices. "It's just a long haul," he said. "It's doing everything that producers have been hearing about for years, such as taking a closer look at feed additives, paying close attention to forage quality and cutting costs whenever possible."

Despite a discouraging start to 2010, interest in milk pricing could help brighten the outlook, Schutz said.

"There's a lot of momentum to somehow change the pricing system to stabilise prices and at least make them more predictable," he said. "This could be done by asking the USDA to reform how prices are established or by creating a supply management programme. In a large industry like the dairy industry, there is considerable difference of opinion on how that should happen, but the good news is there's a lot of interest and discussion right now."