Aid for dairy farmers on Obama's desk

WASHINGTON — Dairy farmers suffering from low milk prices would benefit from emergency funding approved by the Senate on Thursday as it cleared a $121 billion agriculture spending bill for President Barack Obama's signature.

The bill also delivers a record $58.2 billion for the food stamp program, which when combined with benefit increases passed under Obama's stimulus bill earlier in the year would mean a 19 percent increase in food stamp spending.

The measure passed 76-22. Obama is expected to sign it into law soon.

Lawmakers from dairy-producing states succeeded in getting $350 million in aid for milk farmers struggling to cope with falling market prices. That includes $60 million to cover the federal purchase of surplus dairy products for food banks and other nutrition programs. The remaining $290 million is expected to go out in direct payments to farmers.

The dairy industry, the top farm sector in the Northern San Joaquin Valley and statewide, is in especially tough times.

Milk prices plummeted at the start of 2009, as the recession reduced global demand and a surplus of dairy products built up. The prices, far below the cost of production, are expected to force about 10 percent of the state's dairy farmers out of business this year.

The USDA has responded with several efforts, including export subsidies and increased use of dairy products in nutrition programs.

The dairy aid proposal was welcomed by lawmakers from the Midwest and Northeast where dairy operations are smaller, but was viewed skeptically by lawmakers from California, New Mexico and Idaho, home to much larger dairies.

Lawmakers from those states were worried that $290 million in direct payments would be delivered along the lines of an existing program that caps payments in a way that disproportionately benefits farms of about 200 cows or less.

Sen. Barbara Boxer, D-Calif., demanded and received a meeting with Agriculture Secretary Tom Vilsack on Wednesday, and said afterward that she was encouraged that the money would be delivered equitably, reflecting the larger herds in the West.

And on Thursday, a bipartisan House-Senate group of lawmakers from large dairy production states urged Vilsack to make sure payments are distributed on a "more equitable basis" than the existing direct payment system, the Milk Income Loss Contracts program.

Michael Marsh, chief executive officer of Modesto-based Western United Dairymen, said the deal is good for the state's dairy farmers. He said it would put money in the pockets of financially strapped farmers while restocking the shelves of of food banks with surplus cheese.

Marsh said dairy groups from the West would have preferred that all $350 million be used to buy surplus cheese. He said that would have returned more money to farmers, stabilized the entire market and provided even more cheese to struggling food banks.

"That's a win-win for everybody," Marsh said.

Although he and other industry representatives still are looking for more funding to reduce cheese inventories, he said this legislation is an important step in helping dairies regain their financial footing.

While it isn't clear how much each dairy will get, what formula will be used to determine the payouts and when the money will begin to flow, Marsh said California's dairies will get their fair share.

He praised Boxer's effort to ensure that the state's dairies won't be penalized because of their larger size, typically 1,000 cows in California compared with 150 in the Northeast.

On the Net:; the bill is HR 2997.