“It would be terrible for our industry to enact a margin insurance-only program that guaranteed processors access to cheap milk by encouraging excess milk production, but that is exactly what some have proposed. An insurance-only program is dangerous because, by insulating producers through insurance payments, it actually prevents market signals from getting through,” he said.
Mulhern added that realistic insurance rates under a margin-only program would have to be much higher than those proposed in the Dairy Security Act in order to cover a greater portion of the cost of such a program.
“We are able to keep the insurance rates affordable under the DSA because the market stabilization program will help keep supply and demand in better balance,” he said. “Without stabilization, a margin-only program could become prohibitively expensive for small- and medium-sized producers to participate. That would be damaging here in the Midwest, and throughout the country.”