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October 2021, Volume 27, Number 4

US: Dairy. Trade

Milk production is shifting from coastal areas to the middle of the US, reflecting lower feed and labor costs as well as fewer environmental regulations. The shift to the midwest has also been accelerated by Americans substituting cheese for fluid milk, since cheese has a much longer shelf life and is easier to transport.

In 1975, Americans consumed an average 539 pounds of milk equivalent per person, including 14 pounds of cheese. In 2019. Americans consumed 653 pounds of milk equivalent per person, including 38 pounds of cheese. About 10 pounds of milk is required to make a pound of cheese.

Cheese factories benefit from economies of scale, so they locate where there are concentrations of cows. The milk of 150,000 cows is required to operate a large cheese plant, and some cheese plants are supplied by a relatively few very large dairies.

Feed is over half of the cost of producing milk, and USDA’s Dairy Margin Coverage program allows dairy farmers to receive payments when feed costs are high and milk prices are low. Farmers select their level of coverage and pay premiums in order to receive payments at various trigger points; the insurance is subsidized by taxpayers. Dairy farmers establish a production history with USDA based on the amount of milk they sold in 2011, 2012, or 2013, and can receive payments for up to five million pounds of milk produced each year or what a herd of 225 cows would produce.

Triggers were reached each month of 2021, generating payments to farmers that range from $0.25 to $3.25 per hundredweight of milk produced; the base price of Class 1 milk was $17 per 100 pounds in Fall 2021. Almost 19,000 dairy farms were enrolled in the DMC in 2021, and they are expected to receive an average $29,000 in DMC payments.

Dairy farmers are producing more milk, especially in the upper midwestern states where the opening of new processing plants encouraged dairy farmers to expand their herds. The US had 9.5 million dairy cows in July 2021. Dairy exports are rising and expected to top $7.5 billion in 2021, with the leading destinations Mexico, Canada and China.

An effort to end California’s dairy quota implementation plan (QIP) by 2025 failed when less than half of the milk producers who voted supported ending the QIP. The 52-year-old QIP gives quota holders a higher price for their milk that is funded by assessments levied on all milk producers, including those who do not own quota and thus do not receive the higher price. QIP owners want compensation for ending the quota system, while milk producers without quotas want to end what they deem an unfair tax and transfer system.

Trade. The Defending Domestic Produce Production Act (S 2080) would allow the US government to block or tax imports of fruits and vegetables that hurt US producers on a seasonal rather than a year-round basis. Growers in Florida who compete with rising imports from Mexico want the US government to change how it measures harm from import injuries in order to recognize injuries that occur during brief market windows.

Peru has become the world’s second largest table grape exporter, after Chile, shipping over 60 million 8.2kg boxes abroad in 2021. Peru has 15,000 of the world’s 200,000 hectares of blueberries, and expects to have 20,000 hectares of 10 percent of the world’s blueberry acreage by 2025. Two-thirds of Peru’s blueberries are grown under protected culture structures, and the country expects to export over 200,000 tons of blueberries in 2021-22.

SNAP. USDA announced changes to the Supplemental Nutrition Assistance Program (SNAP), formerly Food Stamps, that raise benefits by 20 percent to a maximum $835 a month for a family of four. SNAP currently serves 42 million people at an annual cost of $79 billion; the higher benefits will raise the cost of SNAP to $100 billion.

Supporters of higher SNAP benefits say that government aid ensures food security, while critics emphasize that SNAP should supplement rather than to replace what people would otherwise spend on food. The GAO is reviewing the process used by USDA to revise the Thrifty Food Plan that determines the amount of money individuals and families need to spend on food.

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