Editorial Comment Publisher/Editor

 

CCC Donations Make A Comeback In USDA Dairy Data

Dick Groves
Publisher/Editor
Cheese Reporter Publishing Co., Inc.
dgroves@cheesereporter.com 608-316-3791

November 16, 2018

 

Over the years, there have been a few changes to the tables of dairy statistics published by USDA’s Economic Research Service. And just in the last couple of months we’ve noticed another change that may or may not turn out to be temporary.

These numbers make up the “Dairy Forecasts” table included in the monthly ERS publication, Livestock, Dairy, and Poultry Outlook. The numbers include such things as milk production, marketings, and price forecasts.

One of the statistics that is no longer published by ERS is “net removals,” which refers to a combination of products purchased by USDA’s Commodity Credit Corporation under the dairy price support program plus products exported under the Dairy Export Incentive Program, minus unrestricted sales.

Both of those programs were terminated back in 2014, thanks to the 2014 farm bill, so there are no longer any net CCC removals.

But now there’s a new statistic in these tables: Commodity Credit Corporation donations. That figure refers to products being purchased by USDA as part of its trade mitigation efforts.

It may be recalled that USDA recently launched three actions to help dairy and other farmers in response to trade damage from retaliatory tariffs being imposed by several US trading partners. One of those actions is a Food Purchase and Distribution Program, under which USDA will be purchasing $84.9 million in dairy products to be distributed to participating states, for use in The Emergency Food Assistance Program (TEFAP) and other USDA nutrition assistance programs.

So, the forecast tables included in the monthly ERS outlook report include Commodity Credit Corporation donations on a milkfat basis (0.1 billion pounds in both the first and second quarters of 2019 and a total of 0.3 billion pounds for all of 2019) and on a skim solids basis (0.1 billion pounds in 2019’s second quarter and 0.2 billion pounds for all of 2019).

USDA recently announced the purchase of some cheese under this program, but almost all of that cheese will be purchased and distributed early next year. Hence, CCC donations are listed as zero in 2018 on both a milkfat basis and on a skim solids basis.

This talk about CCC donations and The Emergency Food Assistance Program has us recalling the 1980s and USDA’s efforts to get rid of its surplus dairy product stocks. Those products were acquired under the price support program. The Dairy Export Incentive Program, which was established by the 1985 farm bill, provided another avenue for disposing of surplus dairy products without the CCC taking ownership of the products.

Back in the 1980s, the “US dairy situation at a glance” table in the Dairy Situation and Outlook Report included, way down at the bottom, some numbers for USDA net removals, including Cheddar cheese, butter and nonfat dry milk. In 1983, for example, USDA net removals included 833 million pounds of Cheddar cheese, 413 million pounds of butter and 1.01 billion pounds of nonfat dry milk.

Production of those products that year was roughly 2.9 billion pounds, 1.3 billion pounds and 1.5 billion pounds, respectively. Obviously, the government was playing a pretty significant role in the dairy business back then.

ERS also reported, and still reports, domestic utilization of dairy products. Back in the 1980s (and earlier), domestic utilization included two categories: total, and “Donated.” The donated disappearance was disappearance from government sources.

This was, at least for a few years, the infamous “cheese giveaway” program. Cheese was donated under something called the Temporary Emergency Food Assistance Program. Today, that program is known as The Emergency Food Assistance Program; the “Temporary” has been permanently retired, but the program lives on.

USDA donated quite a bit of cheese back in the 1980s, including a record 645 million pounds in 1983. Cheese donations also topped 600 million pounds in 1985 and in 1987, but by 1990 had dwindled to just 20 million pounds.

Those donations had their consequences. According to USDA’s 1988 report to Congress on the effects of the TEFAP on the displacement of commercial sales, TEFAP cheese donations displaced, over the life of the program, on average, 46 percent of commercial sales of American cheese.
Interestingly, that same USDA report concluded that each pound of butter donated through the TEFAP or other government programs reduced margarine sales by about one pound.

This little piece of history brings us back to today, and the “renewal” of CCC donations. As noted earlier, it’s not expected that these donations will be all that great next year, but we can’t help but wonder if these donations will end up displacing some commercial sales. History tells us that they will.

Another question concerns the duration of the donations. Keep in mind that these donations are part of USDA’s trade mitigation package.
It could probably be assumed that the trade mitigation package will continue as long as “trade damage from unjustified retaliation” (to use
USDA’s words; another way to put it is, as long as other countries respond to US tariffs with tariffs of their own) continues, and who knows how long that will be?

CCC dairy product donations were a key part of the dairy industry’s past, and are now part of the industry’s present and future as well.


Cheese Reporter welcomes letters to the editor. Comments should be sent to: Dick Groves by Fax at (608) 246-8431; or e-mail your comments to
dgroves @cheesereporter.com.

 

 

Dick Groves

Dick Groves has been publisher/editor of Cheese Reporter since 1989. He has over 35 years experience covering the dairy industry. His weekly editorial is read and referenced throughout the world.
For more information, call 608-316-3791 dgroves@cheesereporter.com
https://twitter.com/cheesereporter.


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