US dairy farmers keep on milking, despite cutback offer

A federal plan to reduce the nation's dairy glut has turned sour. Farmers had until Jan. 31 to sign up for a federal program that would pay them not to sell milk. The United States Department of Agriculture announced this week that only about 12 percent of all dairy farmers had decided to take part in the milk diversion plan. That will reduce US milk production by about only 5.5 percent, according the USDA.

As a result, the current dairy glut is expected to be around for at least several months, observers say. For every 10 glasses of milk the nation's dairy cows squeeze out, Americans take in less than nine. The result: the federal government has to buy up the excess. And Washington isn't too happy with the growing mountain of stored cheese, butter, and nonfat dry milk at its doorstep.

The failure of the voluntary sign-up will kick in the second, more stringent phase of the dairy bill passed by Congress last fall.

Looming are two possible 50-cent cuts in the support price of milk in 1985. Each year, the government undertakes to support the price of milk by buying up excess cheese, butter, and nonfat dry milk. Critics argue that the support price has been too high, encouraging dairy farmers to produce more than was needed. In fiscal 1983, the government bought up a record 16.6 billion pounds of excess milk, in the form of dairy products, at a net cost of about $2 billion.

The two cuts in the support price would bring the price down from the current hundredweight. Dairy farmers would only feel about half of that cut, since a current 50-cent-per-hundredweight assessment would no longer be in effect. But the $11.60 is at or near the price some economists predict would bring production back in line with demand.

Both cuts are at the discretion of the secretary of agriculture, based on how much excess milk he expects the government to buy. The first cut, in April 1985, would be triggered by purchase projections of more than 6 billion pounds a year; the second, in July, by projections of more than 5 billion pounds. Last fiscal year the government bought a record 16.6 billion pounds.

Why did so few dairy farmers sign up?

''I'm not saying the program is no good,'' says Ron Hack, who milks 50 to 60 Holsteins with his son and son-in-law in Peotone, Ill. But he's decided not to participate, worried that reducing production after three stable years would hurt his farm's cash flow.

Many of those who did sign up may have little impact on reducing the nation's dairy surplus. Greg Muehling, a dairy farmer in Cissna Park, Ill., milks 30 to 35 Guernseys, and his production has been down in the past two years. Because the program is based on production in 1982 and/or '81, Mr. Muehling has already cut back the necessary amount, in the eyes of the government.

This dairy program is ''not going to be the long-term answer,'' he says, sitting at his kitchen table. And when the program is over, he hopes to increase production.

For his part, Hack isn't keen on government programs. ''We've got to help ourselves,'' he says, standing by the stainless steel tank that holds the ton of milk he produces each day. But ''if it gets too lousy, people are just going to quit.''