So far, the main government action has been to buy up 238 million pounds of nonfat dry milk powder and 4.6 million pounds of butter since prices started to fall in October. Last week, the USDA said it would provide subsidies to export up to an additional 150 million pounds of nonfat dry milk, 46 million pounds of butterfat and 6 million pounds of cheese to help dry up the surplus. Cumulatively, these USDA actions will support milk prices by about 70 cents per 100 pounds of milk, said Roger Cryan, a National Milk Producers Federation economist.
Longer term, some farm groups want to change milk price regulations to better account for the cost of production in the system.
The price California farmers get for their milk is tied to sales of butter and cheddar cheese on the Chicago Mercantile Exchange combined with prices for dry whey and dry milk. Federal regulators and other states use similar formulas.
Farmers have faced low prices before, but what's different this time around is that their cost for feed and other expenses is high compared with what the milk sells for, said Bill Schiek, an economist with the Dairy Institute of California in Sacramento.