This summer Congressman Collin Peterson (D-Minnesota), ranking member on the House Agriculture Committee, introduced a dairy policy “discussion draft” aimed at improving the long-term prospects for dairy farmers. The draft was largely based on the National Milk Producers Federation (NMPF) Foundation for the Future plan. The proposal consists of three main components – a Margin Protection Program, a Dairy Market Stabilization Program and reforms to the Federal Milk Marketing Order system.

The proposal would provide a safety net based on margin protection, rather than price, and replace both the Dairy Product Price Support Program (DPPSP) and the Milk Income Loss Contract (MILC) Program.

In August, Rep. Mike Simpson (R-Idaho) announced he will be a co-sponsor of the draft legislation. Simpson is the lead Republican proponent of discussion draft legislation.

While not yet formally introduced, find the dairy reform package text at:

http://democrats.agriculture.house.gov/inside/Legislation/PETEMN_001_xml_071111.pdf

The legislative language is termed a discussion draft, rather than a bill, as it now allows members of Congress to view the language, prior to it being formally introduced as a bill. Peterson, along with Simpson, will now be seeking additional co-sponsors, from both parties, to co-sponsor and introduce the legislation once Congress returns from its August recess after Labor Day.

In addition to working on the legislation, NMPF has held grassroots meetings across the country to educate and listen to dairy producers. Progressive Dairyman attended two of these meetings and has heard from a number of readers in the last few weeks. Click here to read producer comments at these meetings.

Now it is time to hear from everyone. Please take a moment to vote for whether or not you believe the policy proposed in Foundation for the Future is right for the future of U.S. milk production.

You can learn more about the details of the plan at: www.futurefordairy.com

Yes: Dairy producers realize that the status quo protections offered by current federal policies have failed them during the past decade – especially in 2009 – yet some may understandably be apprehensive about advocating comprehensive reform of those policies.

The Dairy Product Price Support Program (DPPSP) and the Milk Income Loss Contract (MILC) program combined constitute nearly 80 percent of the dairy budget baseline over the next 10 years, according to the Congressional Budget Office. However, the DPPSP has become an ineffective safety net for farmers and has created an unintended outcome whereby the U.S. has become burdened with balancing the world’s milk supply.

The MILC program also has been ineffective in providing a safety net for farmers and treats farms and entire regions of the country unequally. More specifically, it does not address the rise in volatile feed costs and has not prevented the exodus of farms during its decade of existence.

In 2001, there were 97,460 U.S. dairy farms but, by 2010, that figure was 62,500 – a loss of 36 percent of the nation’s dairy farmers, almost all of which were small to medium-size operations of 500 cows or less. This clearly demonstrates the inadequacy of the current program and the need for better dairy policy.

The policy proposals contained in the National Milk Producers Federation’s Foundation for the Future (FFTF) eliminate the DPPSP and MILC programs and create a more efficient and effective safety net in the form of a Dairy Producer Margin Protection Program, the costs of which are shared by dairy farmers and the federal government.

FFTF also establishes a Dairy Market Stabilization Program to prompt producers to respond more quickly to economic signals from the marketplace and at no cost to the government.

Existing farm programs, including the dairy title within the Farm Bill, are expected to undergo further cuts as part of the new federal budget deal passed by the House and Senate. FFTF was created to achieve better economic protection for farmers while also yielding a budget savings – compared to current baseline spending levels – precisely because farm safety nets are going to shrink in the future.

The Congressional Budget Office says FFTF will save $166 million over the next five years, at a time when Congress has now pledged to cut more than a trillion dollars from federal spending.

Dairy producers have acknowledged that shrinking federal resources are the reality. Keeping the status quo is not an option, either economically – as the best safety net to producers – or fiscally, due to budget demands. Producers have been calling for something better for the past two years. We can’t stay where we are, and change is needed, which is why Foundation for the Future was developed.

Jerry Kozak
President and CEO
National Milk Producers Federation

No: The Minnesota Milk Producers Association and the Wisconsin Dairy Business Association would like to thank Congressman Peterson and the National Milk Producers Federation for starting the dairy policy debate. Unfortunately, the policies included in the draft legislation need to be modified before moving forward.

The draft is crafted to closely mirror Foundation for the Future, the package of elements that the National Milk Producers Federation has claimed is the answer to the myriad challenges that dairy farmers have faced over the past few years, including dramatic price volatility.

While NMPF claims that the so-called stabilization program will limit volatility, it will do so only at the expense of our growing export market. U.S. milk production increased about 15 percent, from 165 billion pounds in 2001 to nearly 193 billion pounds in 2010.

However, that growth would not have been possible if U.S. dairy exports had not more than doubled over that same period of time. So far this year, more than 13 percent of U.S. milk production is accounted for by exports. Growing domestic markets simply could not absorb this growth.

The supply management program will remove the U.S. dairy industry as a consistent supplier to the world market by potentially pricing our commodities out of the global marketplace at times, causing a decrease in demand for U.S. dairy exports and more milk price volatility.

The draft language proposes the solution to our federal minimum pricing system is to raise the price of Class I milk. NMPF tried this a few years ago, but thanks in part to efforts by the Upper Midwest dairy industry it was stopped; they are back at it again with this latest plan. When Class I farm milk prices are increased, Class III farm milk prices go down, further discriminating against Upper Midwestern dairy farmers.

Despite six years of 2 percent annual growth, Minnesota milk production has been down the first two quarters of 2011, 1.1 and 3.2 percent respectively. Yet Minnesota dairy farmers would have been required to reduce an additional 4 to 8 percent of their milk production under the proposed FFTF Dairy Market Stabilization Program. If the dairy farmers didn’t cut back on their production, they would have been penalized by the federal government.

The margin insurance safety net provision of the plan is a good start, but falls far short of providing a viable safety net for average Wisconsin and Minnesota dairy farmers. Adjustments in the premium rates and coverage must be made in order to have a program that covers all producers in a fiscally responsible manner.

We believe the answer to the volatility problem is through better risk management tools and are prepared to work with Congressman Peterson and the National Milk Producers Federation to incorporate these ideas. Our organizations want dairy policy reform, but not at the expense of farmers and others who rely on the industry for their livelihood. While we don’t agree on all of the components of this draft, we wholeheartedly agree that changes must be made.

Laurie Fischer
Executive Director
Wisconsin Dairy Business Association

Bob Lefebvre
Executive Director
Minnesota Milk Producers Association