The U.S. had 95.2 million pounds of surplus cheese, the highest level since 1984, and 28.7 million pounds of surplus butter sitting in cold storage as of Wednesday, according to the U.S. Department of Agriculture (USDA).
“The amount in storage now is equal to what we had when the government stockpiled cheese” in the 1980’s and ‘90s,” USDA agricultural economist Jerry Cessna told CNSNews.com.
The difference today is that most of the surplus dairy products are in commercial – rather than government - hands.
CNSNews asked how much of the surplus belonged to the government.
“The government continues to buy cheese for school lunches and such, but it buys it on the market at market prices. Back when there were support prices, the government bought a lot of cheese. But it’s not doing that anymore,” Cessna said.
“A few years ago, NASS (National Agricultural Statistics Service) quit breaking out how much was government stocks and how much was commercial stocks,” he explained. “But government stocks continue to be a very small number since we don’t have support prices for cheese any more."
Federal milk marketing orders guarantee dairy farmers a “reasonable minimum price for their milk throughout the year.”
The Agricultural Act of 2014, which repealed dairy price supports, established the Dairy Product Donation Program, which “requires the Secretary of Agriculture to purchase dairy products for donation to low-income groups when dairy margins…fall below $4.00 per hundredweight (cwt) the 2 prior months.”
But that program “only kicks in when things are catastrophic, and it has not kicked in at all since it began,” Cessna said. "It’s a safety net for dairy farmers when their margins are really, really small.
“Right now, feed prices are very low, so we have a lot milk production. The milk has to go somewhere, so it’s going into cheese,” he said.
At the end of March, cheese stocks were up 11.4 percent and butter stocks were up 32.1 percent over the same time last year even though overall dairy consumption has increased and the U.S. has become a major exporter of dairy products.
"If dairy consumption is going up, why is there so much surplus butter and cheese?" CNSNews asked Cessna.
“Consolidation of the industry – mostly bigger family farms – result in economies of scale,” he replied.
A March study Cessna co-authored entitled Changing Structure, Financial Risks, and Government Policy for the U.S. Dairy Industry reported that “almost 25,000 farms—55 percent of licensed dairy operations – account[ed] for about 80 percent of 2014 U.S. milk production.”
The median number of cows per dairy farm was 900 in 2012, sharply up from 80 or fewer cows in 1987, Cessna explained in the report. “Average milk costs of production fall sharply as herd sizes increase.”
According to Bloomberg, the combination of a strong dollar and a slump in raw milk prices in the European Union is boosting EU cheese and butter exports to other countries, including the U.S, which is also contributing to the surplus.