Senate Floor Statement of Chairwoman Debbie Stabenow, Committee on Agriculture, Nutrition and Forestry , (Dem., Mich.) on Dairy Title in Senate Farm Bill:
“We also reform our nation’s dairy policies, replacing the dairy programs with new, market-oriented programs that allow farmers to manage their own risk in the manner that works best for them. The dairy industry suffered serious hardship in 2009 when milk prices dropped substantially, wiping out many small and medium-sized dairies. Despite spending $1.3 billion that year, our current dairy programs were unable to help all of our farmers though the crisis. In some cases, dairy farms that had been passed down from generation to generation went bankrupt, and some farmers even took their own lives.
“Dairy operations across the country are extremely diverse, and the dairy policies we are setting in the Agriculture Reform, Food and Jobs Act recognize that diversity. We created programs that can be customized by each dairy, and we allowed individual dairies to determine whether or not to participate in the programs altogether. Two programs will now comprise the dairy risk management system: the Dairy Production Margin Protection Program and the Dairy Market Stabilization Program.
“The first provides support based on margin – that is, the difference between the milk price and the feed input costs. This is important because rising grain prices, coupled with dropping milk prices, can have a devastating impact on America’s dairies.
“Producers will have to share in the program’s costs, but it will allow them to manage risk on more of their production at higher protection levels. We are providing a discounted premium for the first 4 million pounds of milk marketed by each producer – that’s equivalent to about 200 to 250 cows – to make sure that small and medium sized operations would be able to participate and that all farms would be eligible.
“The second program, the market stabilization program, sends clear market signals to producers that indicate when they are oversupplying the market. Dairy is a unique commodity in that it is produced 365 days a year, cows must be milked daily, the raw product requires further handling and processing, and there are significant regional differences in management and marketing. By temporarily reducing a participating operation’s payment for milk marketed by a small percentage when there is too much supply, the margin program removes the incentive for dairies to overproduce during times of low margins. The program also includes a suspension trigger based on world prices that ensures U.S. dairies are competitive on the global market.”