Got milk? Uncle Sam sure does.
In caves and giant warehouses, the U.S. government is storing mountains of powdered milk that taxpayers were required to buy, even though nobody is sure what to do with it all.
The dry-milk stockpile has hit a record 1.28 billion pounds, and it is still growing, a side effect of U.S. dairy policies that critics say encourage overproduction of milk, increase taxpayer costs and force a reluctant Department of Agriculture to buy powdered milk to bolster dairy prices.
"We don't want it," said Bill March, a USDA official involved in the program. "We try very hard to minimize the intake of surplus commodities. That's our mission."
But as powdered milk piles up, the USDA is scrambling to reduce the surplus, offering it to school lunch programs, food banks, foreign aid programs and for postwar Iraq. It even shipped more than 200 million pounds out West, to be fed to cattle.
And yet, "[i]t's like a treadmill -- they can only keep up with where they are, but they're not really cutting into the storage," said Don Ault, a dairy specialist at Sparks Cos. in Minnesota. "With a billion pounds, that's a huge amount of powdered-milk stocks; and it's extremely difficult to get rid of" without also destroying the powdered-milk businesses in America.
For dairy farmers in the Upper Midwest, the situation is a double frustration. It underscores how low milk prices have fallen. But also, the surplus is occurring mostly on the West Coast, although dairy farmers nationwide feel the effect.
"In the Midwest, we're not overproducing. In fact, we're short of milk here," said Sue Beitlich, a dairy farmer south of LaCrosse, Wis. "For two years, we have been experiencing 1978 prices, and we have 2003 expenses."
Nationally, the swelling milk stockpile is an embarrassment to U.S. agriculture boosters, including some members of Congress. That is partly because of the cost: Every pound of nonfat dry milk in storage costs taxpayers 80 cents, so it's a $1 billion mountain. And that doesn't count storage costs, from renting space in caves around Kansas City to leasing warehouses around the nation.
A mountain of government-surplus food provides a juicy target for critics. During the Reagan years, a glut of surplus government cheese became a national punch line -- a surplus produced by the very program that has produced today's powdered milk mountain.
March explained how the program functions: "It is congressional statute that we have a dairy price support program, and the intention is to support milk prices at the current rate of $9.90 a hundredweight. When milk falls [below that price] to a certain level, we have to buy what is offered by industry."
Lately, prices are low enough to send USDA buying, at least on the West Coast. A week ago, it bought $7.6 million of powdered milk, bringing its 10-month shopping expenses to $575 million. That intervention has kept milk prices from falling below $9.90 per hundred pounds. But to the critics of farm subsidies, it is yet another example of Washington policymakers sending conflicting signals.
"This is true across all of the agricultural commodities that are supported by subsidy programs," said Ken Cook, head of the Environmental Working Group, a Washington-based policy group. "It sends a signal to produce without regard to the market. . . . Uncle Sam ends up owning it, or trying to dispose of it in one way or another, even as we try to stimulate demand."
Complicating the powdered-milk picture is something called milk protein concentrate (MPC), a type of dry protein extracted from milk that is produced by European and other foreign competitors, but not by U.S. manufacturers. Farm groups have denounced MPCs for coming into this country under questionable pretenses, and for reducing the market for U.S. powdered milk.
Ault, the Sparks vice president, said some food companies prefer using MPCs to powdered milk because of their greater flexibility. But subsidies often drive production. In Europe, subsidies encourage the production of milk protein concentrates. In the United States, processors are subsidized to make nonfat dry milk.
"We've moved a lot of milk, and we've bought a lot of milk, and I don't see an end," March said. "Not until the next farm bill, when they make some changes."