The Hagstrom Report

Agriculture News As It Happens

National Milk promotes its dairy program changes, while IDFA continues to oppose it

National Milk Producers Federation President Jerry Kozak said today he hopes the super committee in charge of deficit reduction will consider including the dairy program bill as part of a jobs and deficit reduction, although International Dairy Foods Association President Connie Tipton said her processor group members still oppose it.

Kozak said he could not estimate the savings because the Congressional Budget Office has not scored the revised proposal, but said the super committee “ought to be looking at us with eyes wide open. We are creating a better safety net and budget savings.”

If there are budget savings in the dairy program bill, that would be attractive to the super committee, which is supposed to reduce the deficit by $1.5 trillion over 10 years, especially if it includes other farm program measures.

But IDFA’s opposition could make its inclusion difficult. House Agriculture Committee Chairman Frank Lucas, R-Okla., has said he will consider a dairy reform bill ahead of the farm bill only if all segments of the industry including the processors back the bill.

House Agriculture Committee ranking member Collin Peterson, D-Minn., and Rep. Mike Simpson, R-Idaho, are expected to introduce a dairy bill very close to the proposal developed by National Milk. Peterson has scheduled a news conference Friday to give his reactions to the changes in the proposal that the National Milk board approved on Thursday.

Lucas told The Hagstrom Report today that he had not had a chance to review the revised proposal.

As originally proposed last year, NMPF’s Foundation for the Future (FFTF) program contained a government-subsidized safety net — the Dairy Producer Margin Protection Program — to protect against periods of low milk prices, high feed costs, or a combination of the two. This program offered a basic level of subsidized insurance coverage, plus the option of supplemental fixed-cost coverage partially paid by farmers.

The FFTF program also contained the Dairy Market Stabilization Program, which was a mandatory means to reduce market volatility by discouraging new milk production during periods of compressed margins.

Under the revised approach, the margin protection program would continue to be voluntary, but if a producer opts to participate in it, participation in the stabilization program would then be mandatory.

If a producer chooses not to participate in the insurance program, then participation in the stabilization program would not be required.

As with the original reform package, the milk income loss contract program would be eliminated, as would the dairy product price support program. The bill also contains other changes to the dairy program.

Kozak said today that the board changed the program in part because some producers said they did not want to participate in what is considered a supply management program. But Kozak said he still wants to encourage dairy producers to participate in the margin and stabilization programs, and that lenders would be likely to encourage or demand participation as well.

IDFA’s Tipton, who had previously objected to the proposal on the grounds that it would raise prices to processors and at certain points make U.S. dairy products uncompetitive in world markets, said today that the reforms had not made the proposal any more acceptable to her members.

“NMPF’s proposal continues a complex, government milk pricing system that will force even higher prices on fluid milk and penalizes producers who want insurance with mandatory supply controls,” Tipton said in a news release. “Unfortunately, these provisions are unacceptable to our members.”

"IDFA opposes milk pricing regulations that would increase the already significant regulatory burden on processors, put more pressure on declining milk sales, and increase costs for consumers, as well as many government nutrition and feeding programs that are already stretched to serve Americans who are struggling to feed their families," Tipton said.

The latest version of the proposal “would change the process for revising the out-of-date federal milk marketing order system by effectively giving dairy farmer cooperatives the power to veto rules that the secretary of Agriculture would develop in the public interest,” Tipton said.

She described it as a “heads, consumers lose, or tails, consumers lose” process that would inflate milk prices.

“By contrast, processors would not be given any vote or say in the adoption of regulations that directly impact their businesses,” Tipton said.

The proposal also contains a national producer referendum, which Tipton said would replace regional voting and allow producers in some areas to force regulations on other regions that may not want to participate.

“IDFA continues to oppose any form of supply management at a time of great market opportunity for its members and the entire U.S. dairy industry,” Tipton said. “The revised [National Milk] plan requires producers to limit supply if they want to participate in an insurance program. IDFA believes producers need risk management tools without more government mandates.”

Kozak said he hopes that the endorsements he has gotten from other dairy farmer groups will hold after the changes, and that he had tried to reach a compromise with IDFA officials, “but it’s pretty clear they won’t.”

“If producers themselves will stop squabbling, put aside regional differences and stop worrying about the size of their farms, we could get this done quickly,” Kozak concluded.