National Milk Producers Federation forming dairy policy plan

By Heather Thorstensen
hthorstensen@agrinews.com

Date Modified: 03/25/2010 9:18 AM

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ARLINGTON, Va. — National Milk Producers Federation is developing a plan for future dairy policy in the hopes their ideas make it into the next farm bill.

Their Foundation for the Future plan has three components: Reform of the federal milk marketing order system, supply management and a new government-subsidized dairy insurance program.

They call their insurance program the Dairy Producer Income Protection Program. It would use federal funds currently going to the Dairy Product Price Support Program and Milk Income Loss Contract program.

"It could potentially replace them," said Chris Galen, NMPF senior vice president of communications.

The insurance program is based on margins, not prices. All dairy producers would receive a base level of insurance paid for by the government that covers a part of a farm's historical yearly milk production and provides payment when there is a "modestly" negative margin between milk prices and feed costs, wrote NMPF president and CEO Jerry Kozak in his March 2010 "CEO's Corner" article. NMPF is looking at different thresholds that would initiate the program, Galen said.

"This is basically a way that farmers could help insure against significant losses in income by addressing negative margins," said Galen.

Producers would have the option of buying a higher level of insurance coverage, a portion of which would still be paid for by the government.

Moving away from MILC payments would remove that program's payment limitation on farms producing more than approximately 3 million pounds of milk per year. Some producers, including Midwesterners, feel MILC is discriminatory or ineffective, and that was part of the reasoning behind the insurance program, Galen said.

Some have suggested DPIPP would stimulate overproduction.

"This is simply not true," Kozak wrote. "The program is designed to address overproduction by only guaranteeing a payment during catastrophic conditions such as those seen in 2009. The program does not cover new production, but it also does not stop new growth nor penalize new growth like the government-mandated supply management proposals that are floating around. It simply allows the new production to be at the risk of the farmer."

Cooperatives Working Together is also under scrutiny to see how it can be improved for supply management under NMPF's plan. The current voluntary, NMPF-managed program reduces milk supply by retiring dairy herds. In the last 15 months, CWT removed 252,000 cows from about 980 farms that produced approximately 5 billion pounds of milk. It also includes an export assistance program to sell cheese and other dairy products.

Some ideas the production management subcommittee is looking into include ways to increase membership in CWT as well as the possibility of partial herd retirements, Galen said. The group is meeting this week inChicago to discuss it further.

Many details have yet to be determined on NMPF's plan to reform the federal milk marketing order system.

"We're looking at a variety of changes, including doing away with the dreaded make allowance," said Galen.

This subcommittee is also assessing pricing signals.

"We want to mend the system, we're not talking about ending it," said Galen. "...This system has been around for more than 70 years, (which is) the lifespan of everyone involved with doing it. Changing something that's been around for as long as anyone can remembers is not something that happens overnight."

It's realistic to assume no major changes in dairy policy will take effect before the next farm bill, Galen said. Meanwhile, NMPF's goal is to create a plan that is financially sound, politically viable on Capitol Hill and within the dairy industry and solves the issue of dealing with higher cost of production.

Their task force includes NMPF board members and others with technical expertise in milk marketing or dairy economics. The federation hopes the group can agree on specific ideas and present them to the board of directors in June. The board must approve the plan, then they have to get it championed by someone in Congress.