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Dairy Talk: Why Reform Is So Hard

November 1, 2011
By: Jim Dickrell, Dairy Today Editor
 
 

Jim DickrellAt first glance, Sen. Bob Casey’s (D-Pa.) dairy reform package, the Dairy Advancement Act, seems like a commonsense compromise for dairy policy reform.

Besides Federal Orders reform and more mandatory price reporting by processors, the package offers producers a choice: Milk Income Loss Contract (MILC) payments or Livestock Gross Margin for Dairy Cattle insurance (LGM-Dairy).

Heck, even processors are singing its praises. "We applaud Sen. Casey’s inclusion of critically needed risk management tools, particularly his call for an expansion of the LGM-Dairy program. ... LGM-Dairy is the type of program that our government should encourage," says Connie Tipton, president and CEO of the International Dairy Foods Association.

Bonus Content


H.R. 3062, The Dairy Security Act of 2011


Upon further review, the devil is in the down-and-dirty. Producers who choose the LGM-Dairy provision under Casey’s bill would be eligible for insurance subsidies for the first 3 million pounds of annual production, with a $1.50 deductible. Like MILC, starting next Sept. 1, that would offer a safety net for the first 150 cows in a herd. The problem, of course, is that herds larger than that get only partial coverage—and yet these larger herds produce in excess of 75% of the milk in this country.

The National Milk Producers Federation’s Foundation for the Future (FFTF) program, embodied in the Dairy Security Act, offers margin insurance to herds of all sizes provided they agree to production limits in times of tight margins. The FFTF production limits are needed to rein in the cost of the program. Casey’s bill limits costs by limiting coverage to the first 150 cows.

FFTF offers a safety net to everyone. Cooperatives recognize that the MILC program leaves some 75% of milk production unprotected—a huge risk for producers and milk cooperatives alike.
If federal spending wasn’t an issue, crafting the perfect dairy policy would be easy. But deficit spending is the biggest problem this country faces. That’s what makes dairy policy so darn hard.

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FEATURED IN: Dairy Today - November 2011
RELATED TOPICS: Dairy, Policy, Issues

 
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COMMENTS (3 Comments)

Frank J - Rockford, IL
The answer to the dairy industry profitability lies with the American corn producer. ETHANOL! Turn milk into ethanol. Already being done in New Zealand. Check out this article from 2007: http://green.autoblog.com/2007/08/20/new-zealand-is-the-first-to-sell-milk-ethanol/ . Call your congressman and lobby them to mandate a certain percentage of milk be turned into 'renewable green' ethanol fuel. No subsidies just mandates. Tell the private sector what they will put in the fuel independent of cost or economics. Mandate 5% of the milk towards renewable fuel and the dairy business will be more profitable than the grain business. Food for fuel seems to be the politician’s best friend to sound green. Don't fight the insanity, join the insanity and enjoy the improved balance sheet. Corn producers have taught us well, maybe it's time we pay attention to our grain producing neighbors and their ethanol sales pitch.
8:01 AM Nov 7th
 
Frank J - Rockford, IL
The answer to the dairy industry profitability lies with the American corn producer. ETHANOL! Turn milk into ethanol. Already being done in New Zealand. Check out this article from 2007: http://green.autoblog.com/2007/08/20/new-zealand-is-the-first-to-sell-milk-ethanol/ . Call your congressman and lobby them to mandate a certain percentage of milk be turned into 'renewable green' ethanol fuel. No subsidies just mandates. Tell the private sector what they will put in the fuel independent of cost or economics. Mandate 5% of the milk towards renewable fuel and the dairy business will be more profitable than the grain business. Food for fuel seems to be the politician’s best friend to sound green. Don't fight the insanity, join the insanity and enjoy the improved balance sheet. Corn producers have taught us well, maybe it's time we pay attention to our grain producing neighbors and their ethanol sales pitch.
8:01 AM Nov 7th
 
DAVID - LOGANSPORT, IN
Jim,
I certainly feel the DAA is fair to all. While it only gives government subsidy to the first 3 million pounds of LGM you fail to mention that it allows the producer to purchase any additional level of margin insurance desired.
To me that is equality to all plus it doesn't ask the tax payer to carry the entire burden. It places the larger burden where it should be, on the backs of the producer at the level he feel the need for.
We have a responsibility to manage our own risk and not ask the taxpayer to do that. Moving producers to LGM will allow them the potential to learn risk management based on their own cost of production. At levels above 3 million pounds we do that for ourselves along with the insurance carrier who provides that coverage.
DSA keeps us dependent on a already stressed government system and places a $4 margin on all taxpayers.
LGM provides options we need as American Producers.
6:17 AM Nov 6th
 



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