Suspension of Dairy Report Makes Forecasts Uncertain

3/23/2013 7:00 AM
By Charlene M. Shupp Espenshade Special Sections Editor

Milk price projections could get a little foggier in the near future as USDA’s National Agricultural Statistics Service suspends its monthly and annual milk production reports through the end of the fiscal year.

The report was one of 10 NASS categories that were suspended because of sequestration cuts.

“I think it is a really big deal. As near as I can tell, everyone in the industry looks at the report for a clue as to what is going on in the industry,” said James Dunn, Penn State agricultural economist.

Dunn uses the NASS data for his monthly Dairy Outlook column, published in Lancaster Farming.

Dunn said he is looking for alternatives, but there is not a complete set of data comparable to what is prepared by NASS.

USDA’s statistical agency has issued its February report but will suspend its next six monthly reports, along with the annual milk production report that had been expected in April. The report with February’s data is on Page A39.The report cuts were a part of the agency’s requirement to reduce its spending by $8 million.

Cornell agricultural economist Andrew Novakovic released a report after the NASS announcement regarding its implications. The report is available through the University of Wisconsin’s Dairy Markets and Policy website, http://dairy.wisc.edu/PubPod/.

“The primary negative effect of the loss of this report will be a reduced ability to understand market conditions and formulate reasonable price expectations,” he said.

It will increase milk market uncertainty and could add to milk price volatility.

“This does not mean the future will necessarily be worse, but it will be more of a surprise or a mystery,” he said. “The elimination of the USDA milk production reports, in short, adds risk to what has become a very risky business.”

Dunn will not be the only one looking for alternatives. The dairy report has been used as part of testimony at Pennsylvania Milk Marketing Board hearings and economic projection reports, and provided information to farmers and processors regarding milk production and dairy herd populations.

Alan Zepp, risk management specialist at the Pennsylvania Center for Dairy Excellence, said the loss of the report will impact the Pennsylvania Dairy Scorecard that his office develops as it monitors industry trends.

“We may be able to develop a rough estimate of national and state milk production from federal order information, but it will not be apples to apples for historic comparison,” Zepp said.

Dunn said the challenge with federal order market reports is that there are a “lot of holes” because of the areas that are not a part of an order system.

For example, in Pennsylvania, the Northeastern order covers portions of eastern Pennsylvania and the Midwestern order covers western Pennsylvania. Central Pennsylvania is not covered.

The loss of the NASS dairy report has a greater impact compared with the other targeted reports because of the large number of working parts in the dairy industry from farmer to processor to exporter.

Looking to his fellow colleagues and other dairy industry forecasters, Dunn said reports always start with the government data.

Kevin Paulter from the Pennsylvania NASS office said he has not received much feedback from the announcement, with the exception of seeing the reposting of the NASS announcement in some organization member updates.

The questions he has received have been directed to the Washington, D.C., office.

While there has been an announcement for the report’s cancellation, his office still has a contingency plan, in case the report is reinstated.

Pennsylvania Agriculture Secretary George Greig said his office has not developed a formal response to the announcement yet.

Speaking to reporters Tuesday in the capitol, Greig said the state Agriculture Department has provided additional funding to the state NASS office responding to past federal funding cuts. The office is housed in the state Agriculture Department building.

This is not the first time these reports were placed on the cutting block, according to Novakovic. The agency announced it was cutting the monthly report in 1982, but would continue the quarterly report.

“Following a firestorm of industry protest, the monthly reports returned in January 1983,” he said.


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10/22/2014 | Last Updated: 3:31 PM