Missouri Analysis Shows Dairy Security Act Better

Scott Brown, an agricultural economist with the University of Missouri, has released his analysis of the Dairy Security Act contrasted with the Dairy Freedom Act.

The Dairy Security Act (DSA) contains both a dairy margin insurance program and a market stabilization program, which kicks in during times of low income-over-feed-cost margin periods. The Dairy Freedom Act (DFA), introduced as an alternative by Cong. Robert Goodlatte (R., Va.) and David Scott (D., Ga.) contains a dairy margin insurance program only.

The Executive Summary results show:

1) Both proposals raise producer net revenue over the period with DSA up 55¢/cwt. and DFA up by 48¢/cwt.,

2) Government costs are $1 billion higher over the 2009 to 2012 period under DFA as a result of an assumed higher coverage rate choice and no supply adjustment mechanism as found in DSA,

3) Milk production on average is virtually unchanged under either option, although DSA DMSP operation resulted in a few instances of short-term reductions in milk supplies up to 3 percent,

4) Market prices for milk increase on average by 6¢/cwt. under DSA and decline on average under DFA by 19¢/cwt.,

5) Exports of dairy products decline under DSA when DMSP operates,

6) Producers would experience the largest revenue increase under DFA with a $7.00 coverage rate while under DSA the $6.50 coverage rate is the most attractive due to differences in the premium structure of both programs.

"These results depend on the period of time chosen," says Brown. "Each of these programs could spend nothing or billions of dollars depending on the exact margin path experienced."

You can read the full report here.