A 17-member Dairy Industry Advisory Committee has tentatively decided that producers would be better off with a federal safety net based on milk margins rather than prices. The committee met via conference call Friday to discuss 23 proposed recommendations to Ag Secretary Tom Vilsack on how USDA can best address dairy farm profitability and price volatility. A final vote on the package is scheduled for March 3.
Panel member Paul Bourbeau, a farmer from Vermont, said the current economic outlook for dairy producers illustrates the inadequacy of existing government intervention options when input costs are high.
"Looking at January through December of 2011we're seeing prices that are going to be nearing record highs," Bourbeau said. "Yet when we start calculating out the milk to feed ratios and the actual margins it's a number that's much more sobering."
Dairy farm profits in 2009 were the worst in decades, and although net income for operators improved last year, weakened balance sheets have left them vulnerable to near-term negative margins.
While most of the recommendations in the committee's draft report, including a rapid phase-out of ethanol subsidies and a review of federal milk marketing orders, garnered widespread support among members - others were harder to reconcile. The creation of a growth management program to coordinate milk marketings with demand was approved on a 9 to 8 vote. Jay Bryant of the Maryland and Virginia Milk Producers Cooperative says the votes were not surprising.
"A lot of the issues in dairy policy are issues that can sometimes be controversial and conflicting," Bryant said. "I think we've done a good job of identifying the different opinions and I think we should be comfortable with that discussion being a part of our recommendation to the Secretary."
As Bryant indicated the 106-page report summarizes the group's debate on the recommendations - both pro and con.
Bob Wills of Cedar Grove Cheese in Wisconsin voiced concern with the recommendation to eliminate dairy price supports and export subsidies and use the budget savings to build a margin trigger and insurance program into the Milk Income Loss Contract program.
"My concern is that that program standing alone without any government safety net program will leave us in a situation where milk production will be more variable and will trend to lower the price levels," Wills said. "That's exactly the opposite result that the committee desires or is healthy for the industry."
The dairy advisory panel is made up of producers, processors, consumers, a retailer and state government official.