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Negative PPDs unprecedented in magnitude

A dairy economist says this summer is not the first time dairy farmers have had at least three months of negative producer price differentials deducted from their milk checks, but it has been the largest amount.

Marin Bozic with the University of Minnesota tells Brownfield in 2003, farmers experienced five months of negative PPDs, averaging to about an 80-cent deduction. During that period again in 2012, producers had another five-month stretch of negative PPDs, averaging in the 80-cent range.  This year, it’s more than four times greater.

“June through August 2020 is negative $3.57. This is actually the worst three months moving average PPD since the federal order reform back in the year 2000.”

Much of the reasoning for negative PPDs hinges on government purchases as part of the Coronavirus Food Box program which Bozic says have been requested by the industry.

“The Food Box program that USDA designed, though it is now criticized as being inefficient, did achieve the dual goal of providing fresh meats, dairy products and vegetables to Americans as well as stabilizing and increasing prices for these commodities, particularly cheese.”

He says during the last major recession, the federal government would support dairy prices by buying large amounts of dry products to put in storage to use at a later date.  But Bozic says since then, there’s been a push to donate products to nutrition programs rather than overhang the market with inventories.

He says the mess in the dairy markets from intervention this time has caused a greater need to examine the milk pricing system through a federal hearing.