Rep. Peterson advances federal dairy policy, major changes discussed


WOOSTER, Ohio — Federal milk policy intended to strengthen the market for dairy farmers was presented for discussion in the U.S. House of Representatives this week.

Rep. Collin Peterson, D-Minn., ranking member of the House Agriculture Committee, presented a “discussion draft” of legislation that will do three things: Replace the current Dairy Product Price Support program and Milk Income Loss Contract programs with a program to protect dairy producer income when the difference between milk prices and feed costs is less than a specified amount; establish a dairy market stabilization program; and amend federal milk marketing orders.

For discussion

Although the legislation is a bill, it is being called a discussion draft to allow for Congressional and stakeholder review, prior to formal introduction as a bill.

The National Milk Producers Federation praises the bill as a strong step forward, one that includes many of the basic points the organization called for in its Foundation for the Future campaign — an effort to correct some of the issues that lead to volatility and periods of low milk pricing for farmers.

“This is a long-anticipated and very welcome next step in the process of upgrading dairy policy to better provide farmers with protection, stability, and the opportunity for growth,” Jerry Kozak, president and CEO of NMPF said in a statement. “We appreciate the attention that Congressman Peterson has brought to this issue, and we will be working with him and his colleagues on Capitol Hill to help advance and implement the concepts of Foundation for the Future.”

But the bill is not without its contenders. International Dairy Foods Association criticized Peterson and NMPF for proposing legislation IDFA says would cause “new and intrusive” mandates to dairy farmers, and potentially tax farmers and limit supplies in order to maintain prices.

“We are disappointed that Rep. Collin Peterson today circulated draft legislation that clearly would take the dairy industry in the wrong direction,” said IDFA President and CEO Connie Tipton, in a statement. “Instead of encouraging job growth and reducing regulation on an already overregulated industry, the discussion draft would impose new and intrusive government mandates into dairy markets at the cost of a growing dairy export business and the jobs that have come with it.”

The debate

The alleged “tax” to dairy farmers is a contentious issue. IDFA says the market stabilization piece of the legislation would require the U.S. Department of Agriculture to assess and collect a tax on dairy production when prices are low.

“The Dairy Market Stabilization Program is designed to limit U.S. milk production by collecting taxes from dairy farmers when farm milk prices are low,” Tipton said. “Our estimates show that nearly $400 million would have been assessed against dairy farmers had this program been in effect in 2009.”

Responding to criticism from IDFA, National Milk issued a second statement, saying IDFA and its president made “several misleading claims.”

On the issue of market stabilization, NMPF says “the money collected is not a tax on consumers; it’s a user fee paid by farmers which will, only as needed, be used to help stimulate demand, and help defray the overall costs of the Foundation for the Future Program.”

NMPF compares the market stabilization plan to fees already collected from farmers to pay for the Federal Milk Marketing Order system.

The other half?

A smaller but very active dairy market improvement group — Dairy Policy Action Coalition — took issue with where the collection fees will be going. According to DPAC, half of the funding goes toward enhancing demand, while the remaining 50 percent, when the supply management program triggers, “would be given to the U.S. Treasury for deficit reduction.”

DPAC calls the government’s share “unbelievable” and “un-American” and encourages its members to become active in the discussion. The organization has historically shared some common ground with other dairy organizations, but supports its own market improvement suggestions, known as the Cornerstones for Change program.

In a statement from Peterson, he says the bill is a timely decision, given the upcoming farm bill and the lessons learned from the 2009 dairy crisis.

“I released this discussion draft now because we need to act before the next farm bill,” he said. “If we have another dairy crisis like we had in 2009, we could lose half our dairies.

The discussion draft allows us to keep the ball moving while continuing to have a dialogue with the dairy industry.”

Although opinions differ on how to improve the national dairy milk market, most major dairy groups have agreed the past few years that federal changes are required.

“Current dairy programs aren’t working; they’re not keeping up with the challenges facing today’s dairy industry,” Peterson said. “This proposal addresses these challenges. The proposal creates a strong safety net that will provide the support all sectors of the diverse industry need during tough times.”

Check it out

The full version of the discussion draft, as well as a fact sheet and summary can be viewed by visiting the House Committee on Agriculture’s Democratic website at

Peterson’s release on the topic contains active links to the documents.

The fact sheet provides an expanded look at the three main parts of this new policy. They are copied and listed below:

The Margin Protection Program is margin insurance that provides a floor for producer margins by looking at the difference between the all-milk price and the average feed cost. It provides a government funded catastrophic loss safety net for all producers and establishes a supplemental program to purchase additional coverage.

The Dairy Market Stabilization Program will prevent extreme margin volatility. DMSP alerts producers when additional milk production may have significant consequences on their overall margins. This program also takes into account export markets, allowing the industry to continue meeting increased worldwide demand. The program is designed to act swiftly and infrequently to address brief market imbalances.

The Federal Milk Marketing Order is simplified and revised, reducing the number of classes from four to two. Class I is bottled or fluid milk and Class II is processing or manufacturing farm milk into something else.

Complicated milk pricing formulas are also eliminated, moving to a more market-oriented competitive pricing structure by replacing end product pricing formulas and mandated minimum prices with a competitive milk pricing system.


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