Federal dairy policy seeks market ‘security, stabilization’

WOOSTER, Ohio — Federal dairy policy intended to strengthen and stabilize the nation’s dairy market has officially been introduced in the U.S. House of Representatives.

Ranking member Collin Peterson, D-Minn. and senior House Republican Mike Simpson, R-Idaho, recently introduced the Dairy Security Act of 2011. It’s an updated version of the discussion bill Peterson introduced in July.

The bill is expected to replace “current, outdated dairy programs” with new risk management tools “addressing the realities of today’s dairy industry, such as rising input costs and a growing export market.”

The bill consists of three main components: A dairy producer margin protection program, a dairy market stabilization program, and reforms to the Federal Milk Marketing Order system.

Changes from the previous bill include:

• Optional participation in the stabilization program. Only dairy producers that elect to participate in the margin protection program will automatically be enrolled in the stabilization program.

• The basic margin program participation rate is increased to 80 percent.

• Funds collected when the stabilization program is in effect would be remitted to the Commodity Credit Corporation, which would then make all of the funds available to the stabilization program board.

• The proposed reforms to the Federal Milk Marketing Order system have been redrafted to direct the secretary of agriculture to amend the system through a hearing process. The language specifies the areas that the secretary is to amend, and requires the secretary to conduct a referendum of the proposed amendments before they can take effect.

• The Dairy Export Incentive Program is repealed.

• Annual administrative fees will be required for all basic margin protection program participants – $100 for producers marketing less than 10 million pounds of milk; $400 for producers marketing between 10 million and 40 million pounds of milk; and $1,000 for producers marketing more than 40 million pounds of milk.

Useful feedback

Peterson and Simpson said they gathered useful feedback during the discussion phase, and feel confident with their latest bill.

“Feedback from all sectors of the diverse dairy industry has been instrumental in drafting this bill and I look forward to continuing these conversations, as well as working with other members of Congress to advance dairy reform,” Peterson said in a released statement.

The bill is intended to address rapid price drops in the dairy market and provide additional stability — something Peterson said is critical for the industry.

“If we have another crisis like we had in 2009, when milk prices dropped and input costs skyrocketed, I fear we could lose half our dairies,” he said. “The dairy safety net did not work then and it won’t work if similar events occur now. Producers cannot wait for another crisis or a new farm bill for Congress to fix the broken dairy safety net.”

Simpson said producer cooperation has been good to this point, and said it will need to continue through the legislative process.

“I appreciate the cooperative spirit and contributions of the members of the dairy industry thus far and look forward to continuing this conversation as the legislation moves through the committee process,” he said in a released statement. “I am confident that the Dairy Security Act of 2011 will provide an effective economic safety net for the U.S. dairy industry while saving taxpayer dollars.”

Cooperative support

National Milk Producers Federation said it “is giving its full support” for the bill, which also meets the goals of National Milk’s Foundation for the Future program.

“It’s been a long journey of reforming dairy policy following the difficult days of 2009, when America’s dairy producers lost billions of dollars in equity, but the introduction of the Dairy Security Act is a huge step towards ending an ineffective program, and replacing it with something much better,” said Jerry Kozak, President and CEO of NMPF, in a released statement.

Dairy Farmers of America is calling the bill “a critical step forward for the dairy industry” and said with a “bipartisan bill now before Congress, it is vitally important that the momentum for dairy policy reform does not waver.”

Other views

The International Dairy Foods Association — which represents dairy manufacturers, processors and marketing, opposes the legislation because it “forces higher prices on fluid milk and penalizes producers who want insurance by forcing them to accept mandatory supply controls.

“Unfortunately, these provisions are unacceptable to our members and we oppose (the bill)” said Connie Tipton, IDFA president and CEO, in a statement.

She said the bill would further burden milk processors and add more costs to consumers, and also increase costs for government nutrition and feeding programs.

The Wisconsin Dairy Business Association lead a group of opposition to the draft bill over the summer, and said Congress is misled if it believed there was a producer consensus.

“There is not, and we hope that these letters (to lawmakers) will serve as evidence that while we agree that dairy policy reform is necessary, it must not come at the expense of farmers and others who rely on the industry for their livelihood,” according to a statement from Wisconsin Dairy Association.

The association has not yet taken an official stance on the current bill, and is still reviewing the changes.

Pete Hardin, editor of Wisconsin-based dairy publication The Milkweed, told farmers at a meeting in Mount Hope, Ohio, that he’s doubtful the bill will pass because it adds new taxes to dairy producers.

“I think the big co-ops are doing a real disservice to the dairy industry by wasting our time on such nonproductive proposals,” he said.