Dairy Talk: Why Reform Is So Hard

At first glance, Sen. Bob Casey’s (D-Pa.) dairy reform package, the Dairy Advancement Act, seems like a commonsense compromise for dairy policy reform.

Besides Federal Orders reform and more mandatory price reporting by processors, the package offers producers a choice: Milk Income Loss Contract (MILC) payments or Livestock Gross Margin for Dairy Cattle insurance (LGM-Dairy).

Heck, even processors are singing its praises. "We applaud Sen. Casey’s inclusion of critically needed risk management tools, particularly his call for an expansion of the LGM-Dairy program. ... LGM-Dairy is the type of program that our government should encourage," says Connie Tipton, president and CEO of the International Dairy Foods Association.

Upon further review, the devil is in the down-and-dirty. Producers who choose the LGM-Dairy provision under Casey’s bill would be eligible for insurance subsidies for the first 3 million pounds of annual production, with a $1.50 deductible. Like MILC, starting next Sept. 1, that would offer a safety net for the first 150 cows in a herd. The problem, of course, is that herds larger than that get only partial coverage—and yet these larger herds produce in excess of 75% of the milk in this country.

The National Milk Producers Federation’s Foundation for the Future (FFTF) program, embodied in the Dairy Security Act, offers margin insurance to herds of all sizes provided they agree to production limits in times of tight margins. The FFTF production limits are needed to rein in the cost of the program. Casey’s bill limits costs by limiting coverage to the first 150 cows.

FFTF offers a safety net to everyone. Cooperatives recognize that the MILC program leaves some 75% of milk production unprotected—a huge risk for producers and milk cooperatives alike.
If federal spending wasn’t an issue, crafting the perfect dairy policy would be easy. But deficit spending is the biggest problem this country faces. That’s what makes dairy policy so darn hard.