NMPF: Time to change dairy policy; Need margin protection, F.O. reform

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ALEXANDRIA, Va. – The National Milk Producers Federation’s board of directors have agreed to move forward with pushing a variety of changes in federal dairy policies.

The board voted June 9 to support the package of concepts contained in the federation’s approach to reforming dairy policy, Foundation for the Future.

NMPF President and CEO Jerry Kozak hopes the package will be used as the basis for dairy provisions in the next farm bill, or in some other form of federal legislation.

“If there is anything good that has come out of the past 18 months of economic struggle, it’s the shared feeling among NMPF’s members that we can use this experience as the catalyst to make needed changes in dairy policy,” said Randy Mooney, board chairman and dairy farmer from Rogersville, Mo.

Plan features

The features of the federation’s plan include: Transitioning the existing safety nets of the Dairy Product Price Support and Milk Income Loss Contract programs into a new Dairy Producer Margin Protection Program to guard against periods of severe financial pressures; Establishing a Dairy Market Stabilization Program to help address periodic imbalances in milk production and demand; and reforming the Federal Milk Marketing Order program.

Need new safety net

Kozak said that the Foundation for the Future is the result of 12 months of deliberations concerning the most appropriate course to follow in reforming federal dairy policies, some of which have been in place for many decades.

“It’s clear we need a new safety net that focuses on margins, not just milk prices,” said Kozak. “It’s also clear we need a system that sends timely, unmistakable signals to farmers that less milk is needed during periods of relative imbalance.”

Insurance program

The federation’s proposal to revamp the federal safety net involves creating an insurance program tied to the margin between the national average cost of feed, and the national average all-milk price.

After farmers choose to enroll in the base level of the Dairy Producer Margin Protection Program at no cost to them, they would receive indemnity payments during periods when their margins are severely compressed, as they were for most of 2009.

In addition, farmers would have the option of purchasing supplemental coverage to protect a higher margin level between feed costs and milk prices.

Stabilization program

Another key element is a proposed Dairy Market Stabilization Program that sends a signal to producers that an imbalance in the marketplace could result in lower farm-level margins.

Like the Dairy Producer Margin Protection Program, the Stabilization Program is tied to farmers’ margins that could be reduced either by low milk prices and/or high feed costs.

Federal order change

Lastly, the Foundation for the Future also calls for changes in the Federal Milk Marketing Order program to create a competitive milk price, maintain Class I differentials, and eliminate unpopular aspects of the current system, such as make allowances.

The changes in the federal order system are intended to be revenue neutral so that farmers’ milk checks are not adversely impacted.

Kozak said the federation will now begin an education effort about the merits of proposals.

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