WASHINGTON
-- Want milk? The government is trying to figure out what to do with $1
billion worth of nonfat milk powder that it bought over the past three
years to prop up the prices paid to dairy farmers.
That is the equivalent of about 1.3 billion
gallons of skim milk, enough to supply the nation's entire consumption
for 16 months. It would take 635,000 cows an entire year to make all
that milk. The bags of powder are kept in a series
of privately owned, manmade caves near Kansas City, Mo., and other
warehouses around the country. An additional 20 million to 25 million
pounds arrive every week. "They keep making it and
we keep buying it," said Steve Gill, an Agriculture Department official.
Under a Depression-era system, the department is
required to control supplies of butter, cheese and nonfat dry milk
powder to keep milk prices above a certain level and support dairy
farmers' revenue. The 1996 Freedom to Farm law,
which was supposed to wean farmers from government support, ended the
milk program in 1999. But Congress extended it temporarily, and then
made it permanent again in the farm bill that President Bush signed into
law in May. Nonfat dry milk is what is left over
after food makers remove the fat from milk to make butter, ice cream and
products for which demand has been booming. Milk
processors do not have to sell the milk powder to the government. They
could break it down into protein products, such as casein, that food
manufacturers need for a variety of products from energy bars to infant
formulas. Processors sell to the government for
one simple reason: The government pays more for nonfat dry milk, about
90 cents a pound, than food makers pay for milk protein.
"The dairy producers, if they ever get something
money-wise from the government, they don't want to let it go. It has
kept our industry from producing products and ingredients that the
market demands," said Connie Tipton, a vice president of the
International Dairy Foods Association. Art Jaeger,
assistant director of the Consumer Federation of America, said the "milk
support price is high and it's bringing out this excess production. That
suggests to me that consumers are paying too much for milk or more than
they should." The Agriculture Department is trying
to get rid of the powder. Storage costs are approaching $20 million a
year, and the powder keeps coming; about 386 million pounds has been
purchased since October. Some of the powder is
donated to domestic programs and overseas. Powder that is getting old --
the government has been storing some of this milk for up to three years
-- is sold for use in animal feed. Now, the
department has decided to sell some of its powder stockpile back to
processors to manufacture casein and caseinate, products that food
makers are now buying from overseas. "It behooves
the U.S. government find out what to do with its inventories," said
Gill, who oversees the commodity storage for the Agriculture Department.
Into the 1980s, the department stockpiled all
sorts of crops and products. Most farm programs, however, are designed
to discourage producers or processors from dumping their surplus on the
government. One exception besides milk is sugar, of which the department
now has about 250,000 tons. The department could
stop the stockpile of milk powder from growing by lowering the price
that it pays for nonfat dry milk, said Tipton. But critics say the
department would then have to raise the price it pays for butter, and
risk acquiring a surplus of that, or else the prices paid to farmers
could drop below the level set by law -- $9.90 per hundred pounds.
"The casein program is a good use" of the surplus
powder, said Chris Galen, a spokesman for the National Milk Producers
Federation. "Obviously, something ought to be done with it."
Even as the government tries to figure out what to
do with his mountain of milk powder, Congress is considering legislation
that would boost tariffs on imported milk protein, raising its cost to
U.S. manufacturers. Food industry officials say the tariff would further
discourage U.S. producers from making casein and other protein products
instead of selling nonfat powder to the government.
On the Net: International Dairy Foods Association:
http://www.idfa.org/ National Milk Producers Federation: http://www.nmpf.org'/
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