The National Milk Producers Federation (NMPF) is seeking a Temporary Restraining Order to stop the USDA from using a private, third-party company to resell milk powder at levels below the Dairy Price Support Program.

At issue is an arrangement the USDA has with a firm called The Seam. Starting this week, the Seam will auction off surplus milk powder given to it by the government. Under the arrangement, the Seam is not required to sell the milk powder to commercial clients at the minimum resale price of 88 cents per pound, as specified in the Farm Bill. Because of this, the auction will result in lower nonfat dry milk prices, and because farmers’ prices reflect commercial dairy product prices, it will reduce dairy producer income, NMPF officials say.

“We strongly believe that USDA’s action will circumvent the newly-adopted 2008 Farm Bill, which says that under the Dairy Price Support Program, the USDA cannot sell nonfat dry milk stocks at less than 110 percent of the price at which it purchased the product,” said Jerry Kozak, president and CEO of NMPF. Kozak noted that the price support program directs the USDA to buy powder at 80 cents per pound, and specifies that the USDA cannot sell it back to the market at less than 88 cents per pound, in order to keep prices from being further driven down.

“The purpose of the price support program is to have the government provide a basic safety net when prices are low, as they are now,” Kozak said. “The USDA is trying an end-run around statutory rules that are designed to keep prices stabilized.”

Up to 20 million pounds of nonfat milk powder are scheduled to be auctioned this week, and if those sales are at levels of between 80 and 85 cents per pound, which is the current market price, it could reduce farm-level income by $57 million over the next year, Kozak said.

Kozak said that NMPF asked USDA executives last week to postpone the milk-powder auction, but USDA did not respond to that request. As a result, NMPF filed suit in Chicago on Dec. 8 to suspend the auction.

“Congress just passed the Farm Bill a few months ago, and that law clearly states that the Dairy Price Support Program must continue to function as a safety net for farmers’ prices,” Kozak said. “This third-party auction concept is a slap in the face to Congress, and to America’s dairy farmers, at a time when farm prices are dropping,” Kozak said.

Source: NMPF