US Agriculture Secretary Dan Glickman has proposed a reform of his country’s Depression-era milk pricing programme. He has suggested replacing the price formula with a weighted price linked to milk components, a temporary floor price has also been proposed to help farmers through the transition.
The current programme, established in the 1930s, sets the minimum price for milk at farm level, based in part on the distance between a farmer and Eau Claire, Wisconsin, which has traditionally been the centre of the country’s mid-western dairy industry. However, Congress directed the US Department of Agriculture (USDA) to restructure the system as part of farm legislation that phased out subsidies for farmers two years ago.
Under the proposed changes, said Glickman, most producers will see less than a 1% price change in their regions. He acknowledged, however, that the reform would be a bigger change for dairy farmers in the north east and mid-western states.
Meanwhile, the USDA has unveiled a pilot cost-sharing programme that will allow dairy farmers to use US futures markets to guarantee a min-imum price for their milk.
Under the Dairy Options Pilot Program, the USDA will subsidise the cost of futures market options contracts purchased by the farmers to protect themselves against unfavourable price movements.