In new analysis of the Foundation for the Future plan, milk prices would have been $2.21/cwt higher had the plan been in effect in 2009, says the Food and Agricultural Policy Research Institute (FAPRI).
Producer penalty revenue generated from excess milk marketings would have totaled $85.4 million in 2009, with the Dairy Market Stabilization Program in effect March through May and September through October. Those dollars would have been used to purchase 12 million lb. of cheese per month April through December.
In turn, those cheese purchases (and removal from the market through non-commercial distributions) would have generated three times the producer revenue than their purchase cost, estimates Scott Brown, a FAPRI dairy economist. The result would have been a $3.4 billion increase in dairy cash receipts.
The FAPRI analysis says dairy producers would have had to cut back production 4% March through May and 3% September through November to avoid payment reductions in their milk checks. FAPRI assumed that 50% of this milk would not have come to market.
The Informa study assumed producers in states that purchase a higher percentage of their feed would have already cut back production because of high feed prices in 2008 and 2009. As a result, those producers would not have had payments withheld from their milk checks because they were already under their production limits.
The FAPRI report publishes only March 2009 cut backs. It does show that California would only have had 0.4% of milk subject to payments because milk buyers had already placed production caps on earlier. But Texas would have had 8% of its milk production subject to payments; New Mexico, 7.6% and Florida, 7.3%. The Midwest would have seen less: Minnesota, 5.6%, Wisconsin, 5.2% and Iowa, 3.5%. Michigan would have seen 8% of milk production subject to the program.
“Some states will be more affected because they were growing milk production at the time the program was initiated,” says Brown.