The U.S. Senate Agriculture Committee did the right thing when it approved a farm bill that contains much-needed change in federal dairy programs, including provisions outlined in the Dairy Security Act. Dairy farmers in the Upper Midwest will benefit from these changes.
The dairy provisions of the Senate farm bill will provide all dairy farmers with a more reliable safety net. The proposed changes will spur innovation in developing new dairy products, and it will help co-ops and other Midwest processors compete in growing world markets.
The Senate’s legislation includes a new, voluntary margin protection program to better safeguard farmers against disastrously low margins, such as those generated by the low milk prices and high feed costs that cost dairy farmers $20 billion in net worth between 2007 and 2009.
This policy was originally developed by dairy farmers, who came together to craft dairy policy that will allow the U.S. dairy industry to be more responsive to markets and provide a better safety net than the programs of the past.
The new margin insurance program replaces a strictly price-based safety net with a program that accounts for milk and feed prices together. It also allows for coverage of more of the country’s milk production than current programs.
Producers are able to participate at varying levels of coverage depending on their needs and comfort levels. Producers also have the option of not participating. If they are comfortable with managing their own risk, or don’t want to be subject to the Market Stabilization Program, they don’t have to sign up.
By removing the “Dairy Product Price Support Program,” we are letting world markets know that the U.S. is a full-time participant. We’re telling customers that the United States is a committed supplier, stopping the practice of leaving the export market in low-price times — just when we need markets the most. And, milk prices become regulated by demand rather than dairy policy.
The Milk Income Loss Contract (MILC) program was too restrictive in terms of who could participate. It also wasn’t always activated in times of low producer margins.
The Market Stabilization Program (MSP) is designed to kick in only when shrinking demand squeezes producer margins. It’s a temporary program that helps to amplify market signals when there’s more milk being produced than there is demand for fluid milk and dairy products. Once supply comes in balance with demand, the program stops. If world prices drop significantly below domestic prices, the program stops.
When the program is not in effect, there are no restrictions on either entering the industry or growing an existing operation.
As producer directors of our respective dairy processing cooperatives, we have been involved in formulating the policy provisions of the Dairy Security Act and believe it offers the best chance to provide sorely needed reforms to federal dairy policy. We urge the entire Senate to approve the bill that was passed by the Senate Agriculture Committee.
We need a dairy program that gives American dairy farmers consistent access to growing world dairy demand and provides security for all producers. Randy Mooney,Rogersville, Mo.
(The author is chairman of the board for Dairy Farmers of America. The letter was also signed by David Scheevel, Preston, Minn.,chairman of the board with the Foremost Farms USA Cooperative; and Pete Kappelman, Manitowoc, Wis., chairman, Land O’Lakes, Inc.
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