WASHINGTON (AP) — The Agriculture Department is helping struggling dairy farmers by raising the price paid for milk and cheddar cheese through a dairy price support program.

The department estimates the increases will boost dairy farmers' overall revenue by $243 million. Agriculture Secretary Tom Vilsack said the price increase will provide immediate relief and keep dairy farmers on the farm while they weather what he called "one of the worst dairy crises in decades."

The increase announced today will raise the price paid for nonfat dry milk from $0.80 per pound to $0.92 per pound, the price paid for cheddar blocks from $1.13 per pound to $1.31 per pound, and the price of cheddar barrels from $1.10 per pound to $1.28 per pound. This increase in the support price will have an immediate effect upon dairy farmers' bottom line. Temporarily raising the price of these dairy products increases the price that dairy farmers receive for their milk.

USDA estimates that today's announcement is expected to increase the all milk price received by dairy producers. The increase will result in the government purchase of an additional 150 million pounds of non-fat dry milk (NDM) and an additional 75 million pounds of cheese.

Many dairy farms around the country have been in danger of closing as milk prices have hit lows and operational costs have skyrocketed. The department says it is reviewing dairy policy to determine what changes are needed.

Copyright 2009 The Associated Press. (along with USDA press release)

Raising the support price 18 cents for cheddar blocks and barrels should raise the Class III milk price by about $1.80 per hundredweight, using the rule-of-thumb that every one-cent increase in the cheese price equates to a 10-cent increase in the milk price. That is good news! But, in this case, with previous Class III prices languishing around $10, boosting the Class III price to $11.80 is not exactly what the doctor ordered. In order to get prices back up to $20 (or above), continued reductions in the national herd are needed, so that the 9.3-million-cow figure we ballooned to earlier this year is reduced to around 8.9 million. And, there is still too much supply relative to demand. One can only hope that the export market will turn around again. During the boom years, from 2006 to 2008, exports gave farmers the assurance that they could expand to feed a hungry world. When the export market tanked, it left farmers without a safety net.   Tom Quaife