How it works
Mulhern pointed out that there is a good argument for both margin protection insurance and market stabilization.
"Let's say the milk price drops to $14," he explained. "We've seen that happen several times in the past 15 years. If you have margin protection insurance, it still gives you $20 milk. Nobody is going to cut back if they're getting $20 for their milk. Taxpayers aren't going to fund that program. But, market stabilization (supply control) kicks in when the margin is under $6."
Mulhern noted that market stabilization would have kicked in in 2003, 2009 and in the summer of 2012 when feed prices were high due to the drought.
Meanwhile, some farm programs, including MILC payments, expired with the end of the fiscal year Sept. 30. That will have little effect on dairy producers since MILC payments are not expected between now and the end of the year. Other programs, including the dairy price support program, are authorized through the end of the calendar year.
Should Congress be unable to reach agreement on a new long-term farm bill by then, another one-year or two-year extension of current programs is possible. In the absence of either another extension or passage of a farm bill, farm policy would revert back to the permanent law of 1949 which would increase the pay price to dairy farmers to between $30 and $40 per hundredweight and the price of a gallon of milk in the stores to $6. However, the House has already introduced a bill that would remove the default to the 1949 Farm Bill which would take away "the hammer" over Congress to get something done.
Make the call
Opponents of market stabilization scoff at the idea of milk supply management. But the dairy industry currently has a milk supply management plan in place and has had for years – it is called survival of the fittest. The milk supply increases, then the milk price drops and more dairy farmers go out of business.
I urge you to call your U.S. representative, Sen. Ron Johnson, R-Wis., and Sen. Tammy Baldwin, D-Wis., and tell them to pass a farm bill that includes the Senate dairy policy reforms. Your future in the dairy business depends on it.