Agriculture Secretary John R. Block, after milking a cow and playfully squirting fresh warm milk at unsuspecting city folks, yesterday announced government plans to give 50 million pounds of surplus butter to needy families.

Hands still moist from his milking demonstration, Block took a microphone at a dairy promotion festival to announce the butter giveaway and plug a new Reagan administration plan to cut federal dairy-support costs.

The secretary said the butter distribution, tested earlier in Waterloo, Iowa, will be patterned after the Department of Agriculture's surplus cheese program.

Block said the butter, valued at about $75 million, will be distributed across the nation through state, local and non-profit charitable organizations between now and year's end. USDA officials estimated that each low-income household would receive two pounds of the butter.

Even at that, the government will be left with some 330 million pounds of butter in 130 freezer warehouses around the country. More than 1 billion pounds of nonfat dry milk and 684 million pounds of cheese also are in Uncle Sam's larder.

Earlier last week, Deputy Secretary Richard E. Lyng told Congress the administration is expanding its cheese giveaway in another effort to reduce the stocks. Lyng said 220 million pounds--about a third of the cheese pile--will be given away this year.

Lyng also indicated that USDA will provide more dairy commodities to institutions and food banks, send more surplus overseas in the Food for Peace program and sell additional out-of-condition nonfat dry milk for animal feed.

The surpluses are part of the government's growing store of dairy perishables purchased under a federal milk-support program that USDA predicts will cost $2 billion this year and about the same in fiscal 1983.

Despite moderate program cuts after bitter wrangling last year between the administration, Congress and the influential dairy lobby, milk production has continued at a steady rate, still exceeding USDA budget estimates.

Block used yesterday's industry promotion, which brought cows, milk products and a county-fair atmosphere to the Mall, to stump for approval of the administration's new proposal to cut supports.

The administration plan is one of a number pending before the House and Senate Agriculture committees, which are contemplating readjustment of the dairy support scheme they included in basic farm legislation passed last fall.

The new USDA plan would give the secretary, rather than Congress, the power to set support rates--a move that already has generated heated controversy. The administration contends that its plan is the simplest and least expensive.

Federal spending on dairy products has skyrocketed since 1977, when Congress, at industry's urging, enacted major increases in price supports. Production was spurred as a result and surpluses mounted.