Originally created 05/24/05

Government running out of surplus milk powder



WASHINGTON - The government is projected to run out of surplus nonfat milk powder later this year, which is a good sign for dairy farmers but will cut into food aid programs for the poor.

The surplus, which was more than a billion pounds just two years ago, is dwindling because of high milk prices. When prices are low, the government buys surplus dairy products to help boost farm income, and distributes the surplus to food aid and livestock feed programs. With high prices, the government cuts back on purchases.

The surplus is now less than 200 million pounds, and is expected to be exhausted by Sept. 30, the end of the federal fiscal year.

As a result, the Agriculture Department estimates that 45,000 older people will be cut off from the federal Commodity Supplemental Food Program, or CSFP, which provides food aid to needy mothers, infants and the elderly. But the National CSFP Association, composed of state, local and nonprofit directors of the program, predicts the number will be much higher - 120,000.

The CSFP has relied on free powdered milk and cheese over the last few years, but will have to purchase the products starting this fall, which will increase the cost of the program.

"We understand there's no money and hundreds of priorities, but we represent over 500,000 seniors, and they don't have someplace else to go," said Vicki Metheny, president of the National CSFP Association.

The elderly would be the ones affected by cutbacks because, by law, the program gives mothers and infants first priority, she said.

Beneficiaries receive boxed food that is meant to supplement their nutritional intake, such as evaporated milk, dry milk, cereal, vegetables, fruit, beans and canned meat.

"It targets specific nutrients, typically lacking in most low-income diets, because they're expensive," Metheny said.

Sherrie Tussler, executive director of the Hunger Task Force in Milwaukee, said USDA should find substitutes for dairy products rather than reduce the number of beneficiaries.

"Mountains of food come and go, and if it's not a mountain of powdered milk, there are mountains of other foods you can purchase," Tussler said. "It's not a travesty or a crisis that we're out of powdered milk, so much as it's a travesty or a crisis that we can't figure out how to use excess commodities to feed the poor."

But Ron Vogel, the associate deputy administrator for special nutrition programs at USDA's Food and Nutrition Service, said his agency knows of no other commodities in large supply.

"There are none we're not making available," he said. "These products are being distributed. Nothing is sitting in warehouses."

Overall, the shrinking surplus of powdered milk is a boon for the U.S. government and taxpayers. In 2002, storage costs alone for the powder peaked at $2.3 million a month, said Michael Yost, associate administrator of USDA's Farm Service Agency. For the first few months of this year, that cost had dropped to $360,000 a month.

Yost also stressed that things could turn around quickly.

"There's always a significant chance we will buy milk again this fall and winter," he said. "The market is long overdue to respond."

Ed Jesse, a dairy economist at the University of Wisconsin-Madison, agreed.

"I think this is a short-term phenomenon," he said. "I think the surplus will come back. We'll be seeing significant government purchases of nonfat dry milk, because prices will be going down."

Chris Galen, vice president for communications at the National Milk Producers Federation, noted that the program was criticized in the days of the big surpluses.

"It shows you how quickly the situation has reversed itself," Galen said. "The proverbial mountain has become a molehill."

DWINDLING SUPPLY: The federal government's supply of surplus nonfat milk powder is projected to be exhausted later this year because of soaring milk prices.

WINNERS AND LOSERS: As producers prosper in the market, the government cuts back its purchase of surplus milk for the Commodity Supplemental Food Program for needy mothers, babies and the elderly.

LOOKING AHEAD: Agriculture Department officials and economists say this may be a short-term phenomenon as the supply-and-demand ratio for dairy products changes in the marketplace later this year.

On the Net:

National CSFP Association: http://www.csfpcentral.org/

Food and Nutrition Service: http://www.fns.usda.gov/fns/