Jim Dickrell is the editor of Dairy Herd Management and is based in Monticello, Minn.
NMPF Gives Up On Federal Order Reforms
Oct 06, 2011
H.R. 3062, the Dairy Security Act of 2011, which is the latest variant of the National Milk Producers Federation's "Foundation for the Future" plan, essentially gives up on Federal Milk Marketing Orders reform.
Way back when, the very original plan was to do away with the "higher of" Class III and IV prices to set the Class I mover, use a competitive price survey to discover the Class III price average to set the Class I price, eliminate Class III make allowances, remove minimum prices for Class II, III and IV, eliminate negative Producer Price Differentials and essentially go to a two-class system of fluid and manufacturing milk.
As Jim Tillison, NMPF senior VP of marketing and research says, it wasn’t complete reform but it went from A to M. The Dairy Security Act of 2011 back tracks, and goes from A to maybe D. It essentially eliminates all of that with the exception of new price discovery mechanism for Class III (whatever that might end up to be) and the elimination of cheese make allowances.
To be fair, Federal Order reforms were the toughest part of the FFTF negotiations. They took the longest to negotiate, and were the last part of the package released. Early on, producers and co-ops in areas heavily dependent on fluid sales raised a ruckus over elimination of the "higher of" component to set Class I prices. They argued this one component would take $200 million out of producers’ pockets (though it could be argued that lower fluid prices might stimulate higher fluid sales.) In any event, the "higher of" component was compromised away early in the process.
Then, this summer, NMPF put on a 13-city road show at which some 1,400 producers and industry folks got to weigh in on the FFTF package. Rep. Collin Peterson (Rep., Minn.) also put out his draft proposal that pretty much mirrored the proposed Federal Order reforms in FFTF.
"NMPF advocated for these Federal Order reforms, but we [and Congressman Peterson] had to be sensitive to producer concerns," says Jerry Kozak, NMPF President and CEO. He and other NMPF officials put on a 90-minute press briefing here at World Dairy Expo yesterday.
Kozak readily admits the Dairy Security Act is a much watered down version of the originally envisioned changes. But he says it still does away with cheese make allowances. Combined with a competitive price survey, that could raise cheese prices the equivalent of 70¢/cwt.
"We still continue to support Federal Order reforms. But you reach a point that if you eliminate the dairy price support program, the Milk Income Loss Contract program and the Dairy Export Incentive program that provide little support, you might have achieved enough with this bill. The Federal Order reforms we were proposing may have been too much at one time for everybody to grasp," he says.
Perhaps so. And perhaps it is what is needed to coalesce dairy producer support around this bill.
But it is an opportunity lost. And it gives dairy processors another target at which to aim their opposition.
The complete version of H.R. 3062 can be found here.