Like many others in the agricultural community, dairy producers are keeping their eyes on the 2012 Farm Bill, specifically the Dairy Security Act. The act contains two important provisions for dairy producers: a margin protection program and a market stabilization plan that uses milk payments to communicate market conditions to farmers.
However, the National Milk Producers Federation and the International Dairy Foods Association are each supporting different findings regarding the effectiveness of the farm bill dairy proposals.
According to the NMPF, proposed legislation would have a positive impact on dairy producers and protect them from the effects of low margins. In a study advocated by NMPF and conducted by Dr. Scott Brown of the University of Missouri, the program would have minimal impact on exports of dairy products and reduce dairy producer margin volatility. The study also concluded that that the stabilization program would be in effect only approximately 7.5% of the time.
Jerry Kozak, President and CEO of NMPF, said the analysis shows that U.S. milk output and dairy sales will “hardly undergo the devastating impact the processors are claiming the program would generate.”
But, the IDFA has a different take on the proposal. According to a letter series cited by IDFA and prepared by two dairy economists, Andrew Novakovic, a professor at Cornell University, and Mark Stephenson, director of dairy policy at the University of Wisconsin, the dairy stabilization program is not balanced. Novakovic writes in “The Challenge of the Congressional Dairy Baseline” that projected gross receipts from dairy between FY2013 and FY2022 are 24%, yet government spending on the sector is only 0.1%.
Further, Stephenson and Novakovic review in another briefing paper what would have happened had the proposed stabilization program been in effect from 2007 to 2012. They found that the program would have been active 19% of the time, which contradicts Brown’s future estimation of 7.5%.
Stephenson and Novakovic also found that average cumulative lost revenue from the stabilization program would range from $13,746 for a small farm to $137,465 for a very large farm.
Jerry Slominski, IDFA senior vice president of legislative and economic affairs, said the proposal would result in hundreds of millions of dollars of lost income for dairy farmers.
“Instead of getting their fair share of agriculture subsidies, dairy producers are going to be saddled with a confusing and complex program that will make our dairy industry less competitive and an unreliable supplier on world markets,” Slominski said. “Dairy coops are being penny-wise but pound foolish when they refuse to ask congress to fully fund an adequate safety net for dairy farmers.”
Yet, NMPF’s Kozak said that “the opposition to the market stabilization provision of the Senate farm bill dairy title has been merely based on anecdotes, not on economic reality. The bogeyman of dried-up sales, either domestically or from exports, disappears when exposed to the light of reality.”
The senate is expected to vote on the bill in the coming weeks.