Dairy farming in the US is going through a rough patch. There is too much production and not enough pricing support for investments. Several often repeated proposals have been suggested to address this crisis. While some of these solutions can help, it may be worth considering securing USDA financing to cover costs while adjustments are made to operations. 


The Dairy Crisis Can Be Fixed 

The dairy crisis is a complex problem that is growing in intensity. Small, local dairy farms are finding it increasingly difficult to compete with the larger dairies and are closing shop. Even large dairies find themselves faced with extra supply. Some of the proposed solutions include: 

  • Regulation of dairy production via a cooperative
  • A small surcharge on daily products in case of overproduction
  • Capping the growth rate, and setting a market access fee if the cap is exceeded
  • Merely USDA financing would not do; creating a $20 per CWT price floor & supply management
  • Creating an inventory management program for dairies and setting regional quotas


Regulation of Milk Production: National Daily Cooperative Collaborative

The idea here is for regional production to match regional supply needs. Beyond that, production should be capped. Legal provisions should be built-in for punitive action against excess production. This proposal can be implemented almost immediately.


5% to 10% Surcharge against Overproduction

This proposal calls for a $20 per CWT price floor as there is no overproduction. In the case of overproduction, there should be a fee of $10 per CWT. So long as we are trying to regulate overproduction from reaching the markets, we can build provisions within USDA financing for this to not be allowed.


Growth Rate On a Year-To-Year Basis & Punitive Action

In this proposal, the USDA would be tasked with announcing a growth cap close to 3% on a year-to-year basis every quarter. Producers can only expand production within that limit. If they overproduce, they must pay a market access fee. Previously, similar fees were $0.03–$0.50 per CWT. However, research has found that this would allow the largest dairy farms to get bigger and bigger, meanwhile rewarding smaller dairies to keep working their production caps.


Implementing Supply Management Using a Price Floor

This proposal calls on the USDA to not merely provide ag mortgages, but also buy milk products and help bring stability. There needs to be direct and guaranteed loans for animal feeding. There also needs to be a $20 per CWT price floor. All of this should build toward a federal milk pricing formula.


Inventory Management Program & Quotas

This program establishes regional quotas for dairy production with a predetermined price. Local farmers are best positioned to come up with prices based upon local costs. Any milk that is overproduced may only be exported at low prices. Once again, the stress is upon reducing overproduction. USDA financing and other incentives can be built into the deal for “forcing” farmers to participate.


Addressing Your Own Dairy Crisis

If you are finding you need a bit of help financing your own operations, talk to one of our expert loan officers at AgAmerica. We’d be happy to discuss USDA financing and other financing options available to help keep your farm up and running. Contact us today to see how we can help you.