By  E. W. Lang

USDA announced that there is a supplemental pandemic payment coming for milk producers.  This would cover 80 percent of the revenue difference per month based on an annual production of up to 5 million pounds of milk marketed and on fluid milk sales from July through December 2020.  The words, "and on fluid milk sales," are new to this kind of thing, so there may be something for herds bottling their own milk in this case.  Or not. 

USDA is having processors and bottlers administer this distribution, and the amounts per cwt. vary from location to location.  This is also a new thing, as Farm Service Administration offices have always done this kind of thing in the past.  Watch for investigations over improper subsidy distributions in the years ahead.  Also note that if a coop, for instance, has so much in interest accounts receivable on the books with this producer or another, they may want to keep the subsidy for themselves and call it an interest payment from the producer.    

There are some assurances from the National Milk Producers Federation that they are working for more government assistance for dairy farmers.  In other words, they say it's not enough to cover all losses.  This pandemic payment will be limited to the first five million pounds of milk produced on any farm.  So it helps out for the first 250 or so cows, just like the monthly government milk subsidies that many farms are currently getting.  Note here that a herd milking 500 or 5000 can still only get five million pounds of production to be covered, so this payment is of less total value for large herds.

While it is mechanically possible to milk several thousand cows, I know of no town or country voter who thinks that taxpayers should support industrial scale food production, family farm or otherwise, with subsidies.  A few legislators, like NMPF, think there should be no payment limits, but there are 435 legislators in total.  It's rather a wonder that milk producers get anything at all out of D.C., and most of what we have got has been the result of NMPF lobbying efforts.  Back in the 70s, we just paid off the Nixon Administration.   

I think the take home message here is that government subsidies to milk, corn, soybean or any other farmers don't make any farming entity viable.  Subsidies only offer financial  support such that producers can exit the business in a more orderly manner over time, and not all at once, thus disrupting supplies and generating financial turmoil within the industry sector.  

Consolidation in agriculture is an ongoing phenomenon since the invention of the wheel, actually.  We saw rapid consolidation in poultry take hold in the 1960s and hogs in the 1990s.  The high milk prices of 2014 were followed by abruptly lower prices and faster dairy consolidation in recent years.  Today, it is hard to find a milk buyer  who will back a milk truck in the lane of a new producer in most any part of the United States.

Government subsidies ease this transition, even as almost no legislator in the United States needs the 'dairy farmer vote' to stay in office.

USDA has also announced that July milk production is up nationally, just as milk to feed margins have been historically low.  Class III Milk Futures for the rest of this year average $16.90 per cwt., a loss of 52 cents over the last five trading days.   Block cheese lost 10 cents per lb. at $1.70 and barrels gained two cents at $1.42 per lb.    Butter gained one cent this week.  Milk-Feed Indices average $7.50 per cwt. for the rest of this year, a loss of 30 cents in trading for the week.