Minnesota Producers Raise Concerns Over Dairy Reforms
About 90 Minnesota dairy producers and industry reps raised concerns over the National Milk Producer Federation’s (NMPF) dairy reform package, “Foundation for the Future,” (FFTF) here in Alexandria today.
The meeting, one of 12 scheduled nationally this month and next, went on for 3 ½ hours, 30 minutes longer than originally scheduled, as producers rose to speak. Even before producers were asked for comments and questions, Jerry Kozak, NMPF CEO and President, revealed that draft legislation of the proposal has already scaled back the program.
For example, the original FFTF plan called for margin insurance on 90% of a producer’s base milk production. The draft legislation, in order to meet budget baseline requirements, has scaled that back to 75% coverage. In addition, 50% of the money collected through the program’s market stabilization plan would have to go into the U.S. treasury rather than be used for domestic feeding programs. Originally, all the money collected was to have gone into feeding programs.
Kozak says with those changes, the Congressional Budget Office (CBO) calculated FFTF would save $166 million over current expenditures for dairy programs over five years.
The biggest concerns were over perceived unfairness of the margin protection insurance portion of the plan and market stabilization. Several producers felt it was unfair that large producers receive the same level of margin insurance protection as smaller producers.
“Why should one very large producer, who produces 2% of the nation’s milk and who calls himself a cooperative, receive the same level of subsidy as the average Minnesota producer with 104 cows,” asked Doug Peterson, President of Minnesota Farmer’s Union.
Kozak responded that in order get consensus nationally and to get the proposal through Congress, it cannot discriminate based on size of operation.
Others took issue with proposed changes to the Federal Order Milk Market Orders. Economic analysis of the program shows that FFTF could raise Class I prices as much as 50¢/cwt, which means producers in the Southeast might see their milk prices jump 42¢/cwt while prices in the Minnesota would only increase 8¢.
“We didn’t set out to enhance Class I prices,” Kozak responded. “This is a consequence of going to competitive prices and keeping the ‘higher of’ Class III and IV prices.”
Kozak added that the Federal Order piece of the legislation, the most difficult portion on which to reach agreement, is still a work in progress.
Others expressed concern that the market stabilization program would limit the U.S. ability to compete in world markets. Kozak said that the market stabilization program would not be activated in times of narrow margins if U.S. cheese or powder prices were 20% above world prices. NMPF is still studying this portion of the plan, and it could be tightened even further to ensure the U.S. remains export competitive.
Another producer asked why Farm Savings Accounts, which would allow producers to sequester profits tax free and then use that money in bad times, were not considered. Kozak responded that CBO scoring of such a program would likely prove extremely expensive.
The FFTF road show heads to Dubuque, Iowa, tomorrow.
