“Say ‘Cheese!’”

Author: Elena Lagrange, Graphics: Akansha Roy

The BRB Bottomline: America is hiding 1.4 billion pounds of cheese underground. The reason behind how it got there reveals the complexities of market inefficiencies and the need for sustainable solutions in the dairy industry.

Kept at a strict 36 degrees Fahrenheit with high humidity, a two million-square-foot cave underneath Springfield, Missouri harbors the largest stockpile of the United States’ dairy industry’s 1.4 billion-pound surplus of cheese. The history of how the cheese caves came to be is one that spotlights both government and private sectors impinging on economic markets.  

Crying Over Spilled Milk

The caves trace their roots to the mid-20th century with the Agricultural Act of 1949, which gave the Commodity Credit Corporation (CCC) — a government-owned entity dedicated to stabilizing farm incomes — the authority to purchase dairy products from farmers, setting the stage for government intervention during the 1970s recession and the subsequent shortage of dairy products. Under President Jimmy Carter’s administration, the government injected $2 billion into the dairy industry in just four years. The result was a surge in dairy production as farmers sought to capitalize on government subsidies.

Too Much To Handle

Unsurprisingly, because the government purchased milk that then would not be sold to consumers, a new problem arose: a massive surplus. The government converted the milk into cheese, and stockpiles soon ballooned to a staggering 500 million pounds. CCC acquisitions of the surplus cheese cost about $1.1 billion during the 1982 fiscal year. In response to this unique crisis, then-President Ronald Reagan initiated the Temporary Emergency Food Assistance Program (TEFAP) to distribute cheese to underserved communities, earning the Velveeta-tasting blocks the name “government cheese.” TEFAP’s consequent annual distributions of over 300 million pounds of the government cheese through food banks and community centers evinced the surprising success of the government’s ability to mediate economic markets. Government cheese would become emblematic of the management of surplus on a national scale.

Adding Fuel to the Fire

However, this success was only temporary. The government’s direct involvement in cheese storage waned in the 1990s as dairy prices calmed down, but this period of relief did not signal the end of the crisis. Despite the reduction in government intervention, a new challenge emerged as surplus dairy products persisted. Throughout the 1990s, the Clinton administration created programs and launched campaigns to help sell the surplus. One notable effort was the establishment of Dairy Management Inc., the organization behind the infamous “Got Milk?” ads. Also among their initiatives was the requirement for milk to be included in the federal school lunch program. 

The result? A large disparity between supply and demand. According to the USDA, American milk consumption dropped from 275 pounds per capita in 1975 to 149 in 2017. Contrastingly, milk production has risen 13% since 2010. The consequences of these fluctuations have left the dairy industry grappling with a challenging situation as efforts to manage the surplus have inadvertently altered natural consumption patterns. While the government initially aimed to stabilize the dairy industry, among the repercussions was a substantial imbalance within the dynamics of the industry, prompting a reevaluation of the efficacy of intervention in such economic sectors.

The Resurgence

By 2019, a resurgence of the cheese surplus emerged in the United States — this time a staggering 1.4 billion pounds. With increased production and no indication of a sudden boom in U.S. cheese consumption, this surplus is likely only going to grow. The current predicament is different from that of the 1970s on the basis that the stock is now almost entirely owned by private companies. Amid trade disputes and declining dairy consumption, the American government has continued subsidizing dairy products, with companies stockpiling overages. The resulting existence of the famous Missouri cheese cave is a testament to the failure of the government to adequately oversee markets in the long run.

Dairy Dollars

Further complicating the narrative is the political impact of the dairy industry. The sector receives substantial government support, with $43 billion allocated in 2016 and $36.3 billion in 2017. The dairy lobby exerts significant influence in Washington, D.C. to secure government backing for their industry. The shift in ownership of the cheese surplus raises questions about the sustainability and effectiveness of private sector solutions to ongoing economic challenges, especially when considering their role in the political arena. Because the funds mostly go to large dairy companies that fund the lobby, smaller operations are left to fend for themselves. Rather than championing the cause of small farmers, these agricultural lobbyists align with industrial dairies, leveraging tax breaks and benefits to reinforce their dominance in the market. Less powerful dairy farmers, deprived of adequate government aid, struggle to avoid closure, exacerbating inequalities in the agricultural sector. Ultimately, while government subsidies are responsible for the initial overages, it is the substantial role of companies in influencing these policy decisions that is to blame for the issues that ensued and for leaving an economy now grappling with inefficiency.

Planting the Future

The incentivization of continued production in a declining industry underscores the necessity for sustainable solutions. Creating more restrictive subsidies is the first step; the dairy industry needs to be trimmed to a manageable scale. Dairy Management Inc.’s hundred million-dollar annual budget could fund more socially beneficial causes, such as supporting smaller farms, instead of being used to develop easily marketable products like Domino’s stuffed cheesy crust. Additionally, redirecting subsidies towards research and development for sustainable farming methods, alternative dairy products, and environmental conservation initiatives can play a pivotal role. In the long run, a well-targeted subsidy framework has the potential to evolve the industry to meet modern consumer demands and minimize its ecological footprint.

While dairy production’s path toward reinvention may be on the horizon, it is likely that we will have to wait for a regulatory market correction. What is certain is that the winding history of the United States’ cheese surplus demonstrates the need to critically reassess policies and practices in the dairy industry.

Take-Home Points

  • The United States has a 1.4 billion-pound surplus of cheese, which is a result of incentivization of dairy production in the mid 1900’s.
  • The continuous pattern of government interventions, policies, and subsidies that was meant to stabilize agricultural incomes caused substantial detriment to the balance of supply and demand for dairy.
  • The trend towards private ownership of the cheese surplus highlights the lobbying power of big dairy companies to shape market dynamics and legislation.
  • By reimagining subsidies to incentivize sustainable practices and support diverse agricultural models, policymakers can foster a more resilient and equitable dairy industry that better serves the needs of both producers and consumers.

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