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USDA Report Highlights Mishandling of Government-Owned Nonfat Dry Milk

Oct 23, 2006

USDA Report Highlights Mishandling of Government-Owned Nonfat Dry Milk

A report released last week from the Office of the Inspector General of the U.S. Department of Agriculture (USDA) criticized the department's handling of $20 million worth of nonfat dry milk stocks that had been collected as part of the Dairy Price Support Program. The report was conducted at the request of a former Farm Service Agency (FSA) administrator who questioned two specific incidents involving what he considered inappropriate dispensing of the nonfat dry milk.

FSA handles the acquisition, procurement, storage, transportation and distribution of all nonfat dry milk that is purchased by the Commodity Credit Corporation (CCC) through the Dairy Price Support Program. Both FSA and CCC are sub-agencies within USDA.

"This report provides another example of the problems created when USDA attempts to manage products attained under the Dairy Price Support Program, instead of allowing the marketplace to work," said Chip Kunde, IDFA senior vice president.

The Inspector General audit follows other negative evaluations of the price support program. In a February 2005 assessment, the Office of Management and Budget concluded that, "the price support program has resulted in large, costly stocks of skim milk powder, and has contributed to an oversupply of dairy capacity in certain regions."

A report from USDA in 2004 highlighted problems with the Dairy Price Support Program operating in conjunction with the Milk Income Loss Contract (MILC) program.

According to the report, the MILC program can encourage more milk production and keeps farm prices lower for a longer period of time. At the same time, the report states, the Dairy Price Support Program, which creates a price floor for farmers, has been used by USDA in recent years to buy the extra milk production caused by the MILC payments.

"The result is that milk prices stay lower longer than they otherwise would, increasing the likelihood of larger CCC purchases, and raising government costs for both programs," the report states.

"IDFA supports a fair and market-responsive safety net for dairy farmers, but it is evident that the past performance of the price support program does not meet these criteria," Kunde said. "Congress should seriously question whether this program should remain in effect."

IDFA will continue its efforts to push for dairy policy reforms to be included in the 2007 Farm Bill.

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Posted October 23, 2006

Dairy Delivers