The commercial displacement with government cheese is somewhere between zero and one. But they didn’t buy that half a pound because the government gave them a whole pound,” Brown explains. “Maybe the next person comes along, and they could have afforded half a pound. For instance, if a person with a lower income were to receive a pound of cheese for free, that might not have any impact on their planned grocery purchase, as they might not have been able to afford cheese at all without help. If the USDA purchases cheese to give out to Americans in need via food banks and food assistance programs, does that replace a purchase of cheese someone might have otherwise made?īrown argues that it’s not a one-to-one equivalence but that there might be a spectrum of displacement. First, there’s the theory of displacement. In the latest cold storage report, the USDA shows a little less than 1.5 billion pounds of cheese in storage, along with 355 million pounds of butter, 211 million pounds of pecans and just less than a billion pounds of french fries (it stores a lot of stuff!).Īlthough the current iteration of cold storage isn’t intended to stabilize market prices, it can still have that effect. Only now, it’s for use in food assistance programs. But it kept hoarding cheese and still does so to this day. Eventually, the USDA decided it had had enough, ending the price support program in 2014. The cheese and butter and dry milk would pile up, and then the USDA would have to scramble to deal with them before they spoiled. Not only that, but if the secretary of agriculture decided to hold on to stores past the previous 125-percent cutoff, stocks would keep accumulating.
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“That became a political football, how to handle the release of stocks,” Brown says. Instead of selling out its stores of dairy products when market prices climbed to 125 percent of the support price, it would leave it up to the secretary of agriculture to decide when to release the product. So it moved to the next phase: getting rid of the automatic sell triggers. It started reducing the support prices and buying less stock, but that didn’t have a huge impact. ” RELATED: Why Seasonality Matters for Cheese But most folks weren’t very happy with that kind of operation, and it was costly.
You ended up with prices not able to move out of either end of the spectrum,” explains Scott Brown, an agricultural economist at the University of Missouri. “This is especially true during the 1980s. The USDA buying up cheese prevented the prices from dipping too low-but the department also put a ceiling on how high the prices could climb. Then, once the prices of dairy products hit 125 percent of the support price, the USDA would start selling off its stash in bulk. The result? The dairy market would stabilize, producers would have steady income and prices for the products would eventually rise. It bought millions of pounds of cheese, butter and dry milk from producers who would otherwise have lost a lot of money if they only relied on their regular retailers. When the price of dairy products sunk too low for farmers, the USDA would offer to buy up the excess at a stable rate. In 1949, the USDA introduced the Dairy Product Price Support Program, later known as the Milk Price Support Program. But because milk has a pretty short shelf life, it couldn’t do much with the actual liquid product. To help, the government looked for ways to step in and calm the market. It also doesn’t help that milk production naturally rises in the spring calving season, but demand for milk is generally at its highest in the fall, when the school year starts again. The price of milk has always been volatile, jumping up and down based on limited supply and fluctuating demand.
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