Efforts to support dairy prices over the past three years have resulted in the government buying $1 billion worth of non-fat milk powder and placing it in storage. The bags of powder are stored in warehouses throughout the country. And each week, about 20 million to 25 million more pounds arrive.

The system that requires the government to buy non-fat dry powder, butter and cheese in order to prop up dairy prices was developed during the Depression to help ensure a constant supply of milk. The 1996 Freedom to Farm law was going to wean producers off of government supports. However, the $9.90 per hundredweight of milk support price kept getting extended. Most recently when Bush signed the new Farm Bill into law.

Milk processors don’t have to sell the milk powder to the government. But they do because the price is more than what food manufacturers would pay. The milk powder can be used for a number of products ranging from energy bars to infant formulas.

The cost of storage is approaching $20 million per year and the Agriculture Department is searching for ways to get rid of the powder. Some is donated to domestic and overseas programs. Powder that is reaching its age is sold for use in animal feed.

In addition, the USDA is selling some of its powder back to processors to manufacture casein and caseinate, products that food makers now buy from overseas.

"The casein program is a good use" of the surplus powder, said Chris Galen, a spokesman for the National Milk Producers Federation, to the Associated Press. "Obviously, something ought to be done with it."

Congress also is considering legislation that would increase tariffs on imported milk protein. That move would raise the cost U.S. manufacturers pay for the product, and perhaps turn their interest toward domestic supplies. However, food industry officials say the tariff would only discourage U.S. producers from making casein and other protein products because of the higher cost of U.S. supplies. The end result could be even more powder in storage.

Milwaukee Journal Sentinel, Associated Press