Minnesota Milk members learn about National Milk Producers' dairy plans
By Heather Thorstensen
hthorstensen@agrinews.com
Date Modified: 05/06/2010 9:25 AM
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CLARISSA, Minn.— National Milk Producers Federation CEO Jerry Kozak recently held a conference call with Minnesota dairy industry members. They discussed his group's developing national dairy plan.
NMPF has a task force developing proposals collectively called "Foundation for the Future," the organization's plan for how the dairy industry should move forward.
The task force's ideas are scheduled to be finalized in time for the NMPF board meeting in early June. If approved, NMPF wants the plan to be in the next farm bill.
It calls for discontinuing the Dairy Product Price Support Program and Milk Income Loss Contract program. Their funds would instead pay for a new margin insurance program for producers. The plan also includes Federal Milk Marketing Order reform and a strategy for keeping dairy markets stable.
Kozak pitched the proposals to Minnesota Milk Producers Association's public policy committee.
The committee isn't ready to endorse it since many ideas are coming out of different dairy groups.
"We think it's best for Minnesota Milk to listen and learn at this point and try to share the information that we receive with our membership as we go into the farm bill," said Pat Lunemann, president of MMPA and a dairy producer from Clarissa.
The farm bill will have budget constraints so decisions will likely need to be made about whether to keep current price support programs or to start a new insurance program, Lunemann said.
The current programs aren't considered perfect. MILC is targeted to help smaller operations, such as some in the upper Midwest, but west coast dairies don't qualify for all its payments.
"The dairy price support program, I don't think you would find many dairy farmers that would say it's working," Lunemann said.
The proposed dairy insurance program would protect farmers from catastrophic losses when they reach negative margins between milk price and feed costs.
"We learned in 2006 and 2009 that $16 milk price doesn't mean anything if the cost of production is $17," said NMPF senior vice president Jim Tillison.
Two levels of coverage would exist: a base level paid for by the government and an optional supplemental level that gives more protection, paid partly by the producer.
Lunemann noted the supplemental coverage shown in Kozak's example would've paid producers similarly or less frequently than what they were paid with current support programs. The base program would've paid out less frequently, but details are still being finalized, he said.
Improvements can always be made to the federal milk marketing order system, Lunemann said, because demand for dairy products change and the marketing system needs to change with it.One of NMPF's reform goals is to move milk to its highest value.
"We should really be taking our milk and manufacturing product that meets market demand rather than making product that you know the government will buy," Lunemann said.
NMPF's dairy market stabilization plan also focuses on margins, not milk price supports.When the margin falls below certain triggers -- the current plan proposes three triggers -- producers would only be paid for a set percentage of their base production. Base production is a rolling average of the three most recent months' milk marketings.
When the margin falls below the first trigger, a producer wouldn't be compensated for any milk over 99 percent of base production. The next trigger wouldn't compensate for milk over 98 percent of base production and the third would not pay for any milk over 97 percent. Producers would be notified before the program kicks in. It would remain effective until the margin climbs above the trigger for two months in a row. Money kept from compensating dairy producers would be used to buy or promote dairy products.
Cooperative Working Together is also being revised. It would remain voluntary, and assist with exporting dairy products while also helping members compete domestically with imports. Most funds would go toward export initiatives. The task force committee working on CWT hasn't decided if they will keep the program's mission of retiring herds to lower milk supply, Tillison said.