Foundation for Future explained at Dubuque meeting
By Jean Caspers-Simmet
Date Modified: 08/04/2011 9:19 AM
DUBUQUE, Iowa —Foundation for the Future is a three-part proposal to overhaul dairy policy, National Milk Producers Federation officials told 60 farmers attending a meeting in Dubuque.
U.S. House Agriculture Committee Ranking Member Collin Peterson, a Minnesota Democrat, has released a discussion draft based on National Milk's proposal and could introduce a bill yet this summer.
National Milk's proposal would replace the current Dairy Price Support Program and the Milk Income Loss Contract Program with the Dairy Margin Protection Program and the Dairy Market Stabilization Program. Federal Milk Marketing Orders would be reformed.
The voluntary Dairy Producer Margin Protection Program allows producers to insure up to 90 percent of their historical milk base using the highest annual milk production from among the last three years, said Jaime Castaneda, NMP senior vice president. Basic and supplemental coverage are available.
Under basic coverage, up to 75 percent of a farm's milk production would be guaranteed a $4 margin protection at no cost. With supplemental coverage, producers could buy more margin insurance up to an additional $4 per hundredweight to a maximum of 90 percent of their milk production.
"It provides a margin floor which will help offset either low milk prices or high input costs and prevent equity erosion," Castaneda said.
USDA would calculate the margin on a monthly basis using the All-Milk Price for that month minus feed cost. The Dairy Producer Margin Protection Program would be managed by the Farm Service Agency.
The Dairy Market Stabilization Program would act like a smoke detector to alert producers that any additional milk production may significantly impact their over-all margins, said Jim Tillison, NMPF senior vice president. When this happens, producers will be encouraged to lower marketings to restore balance and improve margins.
The Dairy Market Stabilization Program wouldl be based on margin, which the USDA will calculate monthly. If the margin sinks below the program trigger levels for two consecutive months, the USDA would declare the program's activation 30 days before the month when the deduction in milk payments goes into effect. USDA would notify milk cooperatives, who in turn would alert producers to adjust production. Payment deductions will occur in milk checks.
The Dairy Market stabilization Program works like this: When the actual national margin is $6 or less for two consecutive months, producers will be paid the greater of 98 percent of their base marketings or 94 percent of their current milk marketing. When the actual national margin is $5 or less for two consecutive months, producers would be paid the greater of 97 percent of their base milk marketings or 93 percent of their current milk marketing. When the actual national margin is $4 or less in a single month, producers would be paid the greater of 96 percent of their base milk marketings or 92 percent of their current milk marketing.
Half the funds collected through the Dairy Market Stabilization Program would go to the federal treasury and the rest will be put toward programs that stimulate domestic dairy market consumption. A board would be established to direct the use of the money.