Dairy policy impasse broken?

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Signs are there may be a compromise on dairy policy included in the federal Farm Bill, although specific details remain sketchy as talks continued into Wednesday evening. 

Despite that potential dairy compromise, it's looking more likely final Farm Bill passage will be pushed into February. Congress leaves for a week-long “home work” period on Friday, returning Jan. 27.

The Hill’s on the Money Blog reported that House Ag  Committee chair Rep. Frank Lucas (R-Okla.) said work was moving forward on a compromise dairy plan that does not contain the Dairy Management Stabilization Program (DMSP), but instead is seeking another disincentive to address overproduction of milk.

Politico.com reported House Ag Committee Ranking Member Rep. Collin Peterson (D-Minn.) had expressed some doubt — from what he knew of the proposal — if it would work effectively. 

Some reports indicate the alternative policy is based on a plan drafted last fall by a pair of Ohio State University dairy economists, Cameron Thraen and John Newton. Their plan includes a dairy producer margin protection program coupled with a revised Milk Income Loss Contract (MILC) program, but does not include DMSP.

Groups send letter opposing DMSP

Meanwhile, dairy producer groups opposed to DMSP made a late push in a letter to Farm Bill conferees this week. Organizations signing the letter included the Wisconsin Dairy Business Association (DBA), California Dairies Inc. (CDI), National All Jersey, the Dairy Business Milk Marketing Cooperative (DBMMC), the Dairy Policy Action Coalition (DPAC), the Northeast Dairy Producers Association (NEDPA), and the Kentucky Dairy Development Council. The letter urged conferees to support dairy policy contained in the House version of the Farm Bill. The letter countered what it said was a statement by Peterson that all dairy producers favored DMSP.

"It simply is not factual when Representative Peterson states that all dairy farmers want the government to control the milk they produce on their farms through DMSP. Many dairy farmers from all over the country are aligned and opposed to supply management," said Laurie Fischer, DBA executive director.

"As dairy producers and businesses working in the dairy industry, we ask that you support the dairy title as amended in the House version of the Farm Bill, which excludes the Dairy Market Stabilization Program, also known as supply management," the letter reads.

"We believe this convoluted system is the wrong approach," the dairy groups continued. "Dairy farmers who take advantage of the margin insurance should not be required to participate in a program that would have the government directly interfere in the milk supply. Limiting the milk supply will discourage further investment and hurt our exports." 

"We ask you to please work with your fellow conferees to ensure that the final Farm Bill does not include the DMSP, but rather provides a safety net for dairy farmers without supply management. A strong majority of the House of Representatives believes this is the right approach for dairy policy and the dairy farmers in the United States hope you will join their leadership in seeing this through to the finish line," the letter concluded.  

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OH  |  January, 16, 2014 at 09:10 AM

So these dairy groups want to be able to expand all they want but then want a hand out from the gov if they cause prices to go too low. Really?

Texas  |  January, 16, 2014 at 09:21 AM

Dairy farmers that oppose the DPSM believe they should have in limited access the taxpayer funds. And they like it when the milk price collapse's for long periods of time in the name of exports.

Texas  |  January, 16, 2014 at 09:44 AM

I am disappointed that the dairy industry is going squander this opportunity

Wi  |  January, 16, 2014 at 09:55 PM

There is another option no government program at all! We do not need to look to the government for a magic program to solve our problems. I am willing to bet that any dairy program that comes out of Washington will be a mess, just as bad as obamacare if not worse.

WA  |  January, 17, 2014 at 02:45 AM

I'm with Steve, we don't need any government interaction at all just look to New Zealands system of price discovery. They booted the government went to worldy auctions, they say it was tough the first few years but now they love it. They have the quickest real world indicator of supply-demand. Also we all know the quickest way to correct the market in low prices, everybody sells cows quits feeding so well, which equates to less milk and corrects with real market forces not the government(bailing us out) buying and storing all this product only to dump it back on the market later. Less room for manipulation from our supposed friendly coops. True capitalism or real market forces unmanipulated by anyone or anything if that's possible.

VT  |  January, 17, 2014 at 08:25 AM

Let's look at reality - the supply management program as written in the DMSP would never have been as effective as supporters would want it to be. It was written as a voluntary program. You can bet those 12% of the largest farms who produce 50% of the milk in the US have no need for this type of a margin insurance program and would not have participated, which would have left us with another broken government program AND struggling dairy farmers. And don't we wish we could do what New Zealand has done, but again, take a closer look. The vast majority of output is controlled by one company. It's easy to get everyone moving in the right direction when there is one leader. I'm not sure what the answer is, probably not this alternative either. So much time has been wasted on a program that was really doomed from the start. What is our common ground in dairy? Small, medium and large alike?

new york  |  January, 17, 2014 at 09:15 AM

Let's remember that DMSP is the result of FFTF failing. Just like Obamacare DMSP is set up for failure so they can push for mandatory participation(control of they dairy farm is what they are after). NZ type system might work if you can find an organization that is trustworthy. NMPF not so much and how many of the large coops have been or are currently being sued by dairy farmers for not working for their intrests?

WA  |  January, 17, 2014 at 10:46 AM

Maybe we need to start another organization to run NZ style auctions in this country. Bottom line its real world prices and quick discovery, those two things are huge for our industry. It also seems like the right thing to get government dependence out of the picture not only among our industry but the general public as well. So many good reasons if we all were on board to make it happen not just sit around thinking it'll never work. We really need to look into what NZ did. An example is they changed to way they packaged and also make whole milk powder, they did that because that is what the customers wanted. We know this in our country but we continue to package and produce what we(coops) feel like, mostly what the government likes for packaging if it needs to go into storage. How does that make sense we know all business needs to change certain aspects to appeal to what a customer wants (I know it costs a lot to convert over) but you give the customer what they want or somebody else does.

SD  |  January, 17, 2014 at 10:50 AM

Arguing about dairy programs with $21.80 Feb Class III milk and $4.22 Mar Corn is kind of ironic. Open doors to our product, let us produce and keep corn prices moderate and we can feed the world as effectively as anyone. The modification of the RFS to have a minimum supply of corn (1.2b bu carryout) would keep livestock from being pushed out of business by mandated ethanol, at the same time keeping grain farmers in business with a lower probability of $8.00 corn. Wild swings in prices are killers. If the world needs more milk, we are the best source of that product. If corn is short, take the ethanol plants down temporarily; keeping us competitive on the world market. Ethanol has an alternative but the starch in corn utilized for feed has limited alternatives. The last bushel of corn shouldn't go to an ethanol plant. Demand destruction by eliminating livestock is hard for grain farmer's to recover. The grain farmer's worst issue has become land cost/value, and that's their own fault. Other than global economic downturns similar to summer 2008, we should see worldwide food demand grow, keeping us in the black. Once people evolve to a better diet, it's awfully hard politically to reduce their standard of living and stay in power. A supply management based program makes us a big Canada, inefficient, government reliant and unwilling to react when world demand dictates more or less production. The demand for beef will keep culling an effective alternative to overproduction. Markets do work (most of the time), unfortunately, pain is the way markets work. We need to strive to make our balance sheets stronger, be able to survive anything the markets hand us, and hopefully have more smiles than frowns.

WA  |  January, 17, 2014 at 11:13 AM

This is what always happens we get big high price swings and nobody cares about fixing the ills of our pricing system in the country. I know we can feed the world better than most but doesn't change the ease of manipulation of our markets. corn is a very fluid market but with milk there are only a few traders of cheese(easily manipulated). I feel like a global auction framed from New Zealand's is the answer, I agree a quota system limits our feeding of a growing world population. The reason we took trading out of Green bay and moved it to Chicago or the CME currently was manipulating markets, DFA is still going through litigation from the shenanigans it pulled just a couple years ago. Kind of along the same lines as China rejecting loads of corn currently (GMO's BS)

Vermont  |  January, 20, 2014 at 08:54 PM

This may be the most constructive string of comments I've ever seen on this site. Thanks for the discussion, all.

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