USDA raises prices to aid struggling dairy farms

Friday, July 31, 2009 | 10:12 a.m. CDT

WASHINGTON — The U.S. Department of Agriculture is helping struggling dairy farmers by raising the price paid for milk and cheddar cheese through a dairy price support program.

The department estimates the temporary increases, which will be in place until October, will boost dairy farmers' overall revenue by $243 million.

Agriculture Secretary Tom Vilsack said Friday that the price increase will provide immediate relief, helping to keep dairy farmers on the farm while they weather what he called "one of the worst dairy crises in decades."

Many dairy farms around the country have been in danger of closing as milk prices have hit lows and operational costs have skyrocketed, and lawmakers from high-producing dairy states have been pushing the department to temporarily boost the prices.

The price paid by dairy processors to farmers is set by the U.S. Department of Agriculture based on commodity markets that rise and fall with global demand. Dairies increased production when demand for U.S. milk exports soared last year, but once the global recession accelerated last fall, demand dropped, and farmers were left with too much milk and too many cows. Wholesale prices crashed.

The Agriculture Department has otherwise tried to buoy wholesale prices recently by releasing 200 million pounds of excess powdered milk to schools, food banks and needy countries to reduce U.S. supply and by accelerating payments to farmers.

Vilsack has said the department is reviewing dairy policy to determine what changes are needed to reduce price volatility and enhance farmer profits.

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