The United States government's plan to buy out dairy farms is creating a lot of hoopla. First, the Rochester, N.Y., humane society slapped down a lawsuit about branding the dairy cows. Then, the National Cattlemen's Association sued on the grounds that the plan was disrupting the beef market.
But these are effects, not causes, of the problem. At the root of the US government's troubles is an unanswered question: How do you deal with a dairy surplus? The government and dairy industry have been dancing around that question for several years now, economists agree, and the result is the current uproar over the dairy-herd buyout plan.
On March 28, Agriculture Secretary Richard Lyng announced that the federal government would buy the herds of 14,000 dairy farmers who promised not to reenter the industry for five years. The Rochester Humane Society sued when the Agriculture Department mandated that the farmers' cows be hot-branded on the cheeks, claiming it was inhumane. The department relented and allowed a freeze-branding technique to be used instead.
Then, the cattlemen's association sued in Lubbock, Texas, claiming that the nearly 1.6 million dairy cows, heifers, and calves destined for the beef market were disrupting cattle prices. The district court judge there is expected to rule next Wednesday on whether the department needs to spread out the marketing of the surplus dairy cows.
``As far as the market is concerned, it's been a wreck financially,'' says Tommy Beall, market research director for the cattlemen's group. In the four weeks since the program's details were announced, cattle prices, which had been improving, dropped 2 to 3 cents a pound.
``There just isn't any profit right now,'' complains Atwood, Colo., rancher Herman Hettinger. ``I'm sure a lot of people are going to go out of business.''
Whatever the result of the court battle, it has brought into sharp focus the question of how to deal with surpluses. Faced with a surplus in 1976, the essentially unsubsidized cattle industry has been shrinking the beef-cow herd almost every year since then. Faced with its own mounting surplus since the late '70s, the dairy industry has expanded production in four of the past five years.
``The bottom line is that the dairy farmers do well and the beef farmers get dumped on,'' says Ron Knutson, an agricultural policy professor at Texas A&M University. ``What the [dairy] industry has not been willing to do is bite the bullet and take the cut in price.''
``The price cuts are essential,'' says Andrew Novakovic, an agricultural economist at Cornell University.
Forecasters agree that milk production may equal last year's record and then begin declining. But Professor Knutson doubts the program will bring government-held surpluses back into line. James Miller, an agricultural economist with the Agriculture Department, is more sanguine: Production in `` '87 looks as though it will be what we used to call a modest surplus.''