California dairies unhappy with USDA aid plan

WASHINGTON — Disappointed Central Valley dairies can now start tapping a $290 million aid package unveiled Thursday by the Agriculture Department.

The much-anticipated program will provide dairies with one-time payments meant to offset economic losses due to plunging milk prices and rising production costs. As dairy policies often do, it also exposes sharp divisions among regions.

"Unfortunately, once again, it appears that the politicians in the Midwest have a little more sway in this program," said Michael Marsh, chief executive officer of the Modesto-based Western United Dairymen.

An individual dairy might receive up to about $19,200, based on current estimates. Farmers whose records are already on file with the Agriculture Department could have money wired into their bank accounts as early as Christmas Eve.

While acknowledging the payments can be "a help," Marsh stressed California dairy farmers wanted a different program that didn't cap payments based on farm production. The Agriculture Department program presented Thursday effectively penalizes California and other Western states with large dairy herds, Marsh said.

"As a dairyman, I'll take whatever they want to give us ... but this is not a fair and equitable program," Fresno County dairy farmer Pete De Groot said, adding that he thought the distribution of funds was "outrageous."

By contrast, Agriculture Secretary Tom Vilsack characterized the program as help "during these tough economic times," and it won praise from the Minnesota Democrat who chairs the House Agriculture Committee, Rep. Collin Peterson.

"This is an essential stopgap measure," Peterson said.

The $290 million is part of the Dairy Economic Loss Assistance Program, which also includes a $60 million federal cheese purchase. While the dairy industry had united in seeking help, as milk prices plunged 27 percent between late 2008 and early 2009, nailing down details proved tricky.

Led by Tulare County, California produces more milk than any other state. California's dairies also tend to be much larger than those in the Midwest and elsewhere. This disparity invariably complicates congressional efforts to craft dairy subsidies and programs.

In October, when Congress was rushing to finalize the Agriculture Department spending bill, Democratic Sen. Barbara Boxer temporarily blocked the legislation over concerns it would shortchange California's larger dairies.

Boxer's move won her a meeting with the agriculture secretary. Boxer subsequently declared the conversation to be "very encouraging," and she indicated Vilsack had pledged funds would be distributed in a "regionally equitable" way. Precisely what this meant was left up in the air.

Nonetheless, the final program limits payments based on production. Dairy producers in states with smaller herds feared that without the limits, Californians might soak up most of the money.

"This is a clear example of going against congressional intent," Boxer spokesman Zachary Coile said Thursday. "This announcement does not meet the test of regional equity that was promised by the secretary."

Coile added that the $60 million cheese purchase program should help some.

The direct payments will amount to an estimated 32 cents per hundredweight. A hundredweight is equivalent to 100 pounds. The Agriculture Department will estimate a dairy's annual production based on what was produced between February and July 2009.

Payments will be capped at a maximum annual production of 6 million pounds for each dairy operation. At 32 cents per hundredweight, a dairy producing 6 million pounds could receive about $19,200.

With individual California dairy cows producing about 22,000 pounds of milk a year, this limit amounts to a herd of roughly 272 cows.

The average California dairy herd is about 825 cows. In Wisconsin, the nation's No. 2 dairy state, the average herd size is only about 87.

"California has probably been hit harder than any other state," De Groot said, "but they're giving the same amount of money to small herds."