WASHINGTON -- The International Dairy Foods Association (IDFA) takes strong exception to assertions made by the National Milk Producers Federation regarding the impact of proposed dairy policy reform on exports. NMPF claims that eliminating the Dairy Product Price Support Program will provide more incentive for exports. However, economic models show that the Dairy Market Stabilization Program (DMSP), included in draft legislation offered for discussion by Rep. Collin Peterson (D-MN), would have significantly lowered U.S. dairy exports and hurt industry growth at a cost of thousands of U.S. jobs if it had been in effect in 2009, according to respected economists.
The March 2011 study by the Food and Agricultural Policy Research Institute (FAPRI) of the University of Missouri, The Economic Impact of the Dairy Market Stabilization Program on 2009 Dairy Markets, directly calculates that U.S. dairy exports would have dropped significantly if the DMSP had triggered limits to farm milk production during the dates reviewed. Study results from the appendix table show that during three months - March, April and May of 2009 - U.S. exports of nonfat dry milk would have fallen by 38 percent, butter exports by 16.4 percent and American cheese exports by 8 percent.
"Most everyone now agrees that the price support program hurts dairy exports because it temporarily raises U.S. prices above international prices, yet the stabilization program operates in exactly the same way," said Jerry Slominski, IDFA senior vice president. "National Milk's proposal openly admits that its program will likely have this impact because it includes a provision that allows the Secretary of Agriculture to suspend the program if dairy prices are 20 percent above world prices for more than two months."
"By the time the 20-percent safeguard triggers, it's too late," said IDFA Chief Economist Bob Yonkers, who conducted a review of available data and published research on the proposed Dairy Market Stabilization Program. "Exports would be lost well before there is a 20-percent rise in U.S. prices over world prices. The goal is to be consistent, reliable exporters, and we can't do that if a government program periodically renders our prices uncompetitive."
Jon Davis, president and COO of Davisco Foods, one of the first dairy companies to recognize the significant value and potential of exports, warns that any reduction in exports will have a ripple effect on American jobs and the economy. "We are expanding production and adding jobs in places like Jerome, Idaho; Lake Norden, South Dakota; and LeSueur Minnesota--all because of the growing dairy export market."