The Agriculture Department is helping struggling dairy farmers by raising the price the government pays for milk and cheddar cheese through a dairy price support program.
The department estimates the temporary increases, which will be in place until October, will boost dairy farmers' overall revenue by $243 million.
Agriculture Secretary Tom Vilsack said Friday that the price increase will provide immediate relief, helping to keep dairy farmers on the farm while they weather what he called "one of the worst dairy crises in decades."
Many dairy farms around the country have been in danger of closing as milk prices have hit lows and operational costs have skyrocketed. As the problem has worsened, lawmakers from high-producing dairy states have been pushing the department to temporarily boost the prices for government purchases.
Dairies increased production when demand for U.S. milk exports soared last year, but once the global recession accelerated last fall, demand dropped and farmers were left with too much milk and too many cows. Wholesale prices crashed.
The price boost will result in additional government purchase of 150 million pounds of nonfat dry milk and 75 million pounds of cheese, the department said.
The government price support program is just one of many ways the government helps dairy farmers. The Agriculture Department has otherwise tried to buoy wholesale prices recently by releasing 200 million pounds of excess powdered milk to schools, food banks and needy countries to reduce U.S. supply and by accelerating payments to farmers.
The increase will raise the price paid for nonfat dry milk from $0.80 per pound to $0.92 per pound, the price paid for cheddar blocks from $1.13 per pound to $1.31 per pound, and the price of cheddar barrels from $1.10 per pound to $1.28 per pound.
Vilsack has said the department is reviewing dairy policy to determine what changes are needed to reduce price volatility and enhance farmer profits.
The issue of struggling dairy farms has been gaining momentum on Capitol Hill, with a bipartisan group of 56 members forming the Congressional Dairy Farmers Caucus in July. Lawmakers praised the decision Friday but said much more needs to be done.
Sen. Patrick Leahy, D-Vt., said he hopes the purchases will be a catalyst to help stabilize the downward spiral in milk prices.
"Dairy farms in Vermont and across the nation are hurting, and this is the fastest and most direct short-term step that's available to stop the bleeding," he said. "We will continue to push for other relief but those steps will take longer."
Plainview, Texas, dairyman John DeVos said it is too soon to tell if the increased prices will be enough. He said he wished it wasn't something that was necessary.
"It sounds like it will help," he said. "We don't know as an industry what this will do. We hope that it will have a positive effect on our prices. How far, we don't know."