'Foundation For The Future' Explained At Dairy Expo

US - Supporters of an effort to overhaul the way farmers are paid for their Class III milk are optimistic that lawmakers will eventually approve a new plan pending in Congress.

7 October 2011

3 minute read

North America

Earlier in the week, agriculture reporters got a glimpse of the 'Foundation for the Future' programme being proposed by the National Milk Producers Federation (NMPF).

The initiative led to the introduction of the 'Dairy Security Act of 2011' in the House of Representatives last week by Minnesota Congressman Collin Peterson and Rep. Mike Simpson of Idaho, which seeks to eliminate the current dairy price support programme and replace it with a safety net mechanism that would pay producers a settlement when milk prices fall below profitable levels.

NMPF Spokesman Chris Galen told Wisconsin Ag Connection that the programme, which would be voluntary to producers who choose to sign-up for it, would likely be popular among legislators because it's designed to save the federal government money while giving farmers more options to protect their bottom line.

"The government will actually spend less on implementing this program than what the current Milk Income Loss Contract programme (which is set to expire next year) is costing them now," Mr Galen said.

"With the new Super Committee looking for ways to cut deficit spending, and with the farm bill negotiations ready to begin, we feel this proposed solution will be a great fit going forward."

Specifically, the dairy security bill offers participants access to the 'Dairy Producer Margin Protection Programme,' which would issue insurance payments when the difference between the milk price and feed prices drop below $4.00 per hundredweight of milk. Extra coverage can be added to accommodate for expected herd and production growth. The government would cover part of the premium of the policy, while producers would kick-in a modest fee.

Farms would also be able to sign-up for a 'Dairy Market Stabilisation Programme,' designed to limit production for short periods to prevent steep milk price declines in the market or other prolonged low-margin profit situations. If the producer wishes to enroll in the margin insurance programme, they will automatically be part of the the same stabilisation programme.

Thirdly, the bill directs the USDA to eliminate cumbersome end-product price formulas and make allowances, and create a new, more market-oriented means of establishing farm-level prices. A majority vote of producers would be needed to put these changes into effect.

National Milk CEO Jerry Kozak says the legislation has some new improvements from an earlier version of their programme, such as extending the basic level of margin insurance coverage to 80 percent of a producer's production history; and allowing them to purchase insurance for growth.

"Ultimately, the proposal changes in the way Class III milk is priced from a complicated end-product formula method to a more market-oriented competitive pricing system," Mr Kozak said. "Is it a perfect system? No. But if we try to make it perfect, it won't fly. I think it's the best option we have.. and the status quo will not continue to work."

Mr Kozak said the process started after the industry lost billions of dollars when the dairy economy collapsed in 2009. Since then, his group has talked to over 1,300 producers and held hearings all over the country to gather input on a better solution.

Meanwhile, Wisconsin Farm Bureau President, Bill Bruins, says his organisation has decided to back the policy, calling it the best solution for reform he has seen in his lifetime.

"I like the fact that it eliminates the dairy price support system," Mr Bruins told reporters. "I feel that system encouraged processors to produce cheese for the government rather than dairy products that today's marketplace wants."

Mr Bruins did not like the original concept of requiring all producers in the country to be part of the new plan. But now that the revised policy allows for voluntary participation, he feels each producer can now have a say in their own destiny.

Mr Kozak says the Dairy Security Act currently has eight co-sponsors. He hopes the Senate will come up with a corresponding plan soon.