Committee: U.S. needs dairy policy makeover

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WASHINGTON — A national committee looking for ways to improve dairy farm profitability had to wind through a maze of information to come up with recommendations. And what they found is that existing federal programs and legislation have limited impact on mitigating the massive impact of recent market events.

The national Dairy Industry Advisory Committee voted March 3 to approve a final report to U.S. Agriculture Secretary Tom Vilsack that offers recommendations concerning dairy farm profitability and milk prices. (Link opens .pdf)

The committee was chartered to review farm milk price volatility and dairy farmer profitability, and make recommendations to the secretary on how USDA can best address these issues to meet the dairy industry’s needs, both short and long-term.

The vote supports a report that offers 23 public policy recommendations.

‘Hardship’ trigger

One of the recommendations is that the secretary implement trigger levels for certain food assistance programs (dairy purchases) based on the difference between average milk prices and a new measure of feed costs.

The trigger would offer an objective basis for determining when dairy farmers face extreme hardship, which would justify shifting government resources, for example, into a food assistance program to increase demand for dairy products.

Federal orders

The committee also recognized that the federal milk marketing order program could still be improved, specifically in milk pricing formulas that may be transferring volatility in certain sectors of the dairy market into wider milk prices, as well as the impact of classified pricing and pooling.

The committee also strongly recommended the secretary consider elimination of end product pricing, and explore options such as competitive pricing and mandatory price reporting.

‘Growth management.’

One of the committee’s more divided votes — nine in favor and eight opposed — was the recommendation to adopt a growth management program that allows new farmers to enter, and allows existing farmers to expand production.

The group is also recommending the Milk Income Loss Contract (MILC) program be modified to use an all-milk income/feed cost margin trigger, and provide a margin insurance option, excluded by the cap, to provide protection for larger producers.

A unanimous recommendation was the adoption of tax-deferred farm savings accounts that let dairy farmers create unlimited dollar accounts, which can be withdrawn after six months, with income taxes on contributions and interest paid in the year the funds are withdrawn.

The committee also supported a lowering of the maximum somatic cell count standard for Grade A milk to 400,000 cells per milliliter at the farm level, and to explore the impacts of “California-type” fluid milk fortification standards.

There were also recommendations in support of incentive payments for environmental practices and continuation of the Environmental Quality Incentives Program, or EQIP.

The committee also recommended a phase-out of the ethanol blender’s credit and tariff on imported ethanol.

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