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House Democrat Releases Foundation for the Future Dairy Reform Package

July 14, 2011

Rep. Collin Peterson (Dem., Minn.) has released draft legislation of dairy policy reform package that mirrors the National Milk Producer Federation’s  (NMPF) “Foundation for the Future” (FFTF) plan in the form of draft legislation. Formal introduction of the bill is expected before Congress adjourns the first week of August.

Releasing the draft “gets the ball moving” and discussion started. The legislative language is termed a discussion draft, rather than a bill, as it now provides members of Congress with the opportunity to allow fellow congressmen, key stakeholders, and constituents the opportunity to view the language prior to the official introduction of a bill. It also allows backers of the draft to seek cosponsors who wish to affix their names to the bill, prior to it being formally introduced.
Peterson says current programs, many of which were established 60 or more years ago, are simply outdated. “Today, the export market is the major driver of demand growth for U.S. dairy products and a key component of stronger milk prices,” notes a summary of the draft legislation. “In this environment, interrupting the flow of U.S. dairy products to export markets by temporarily diverting those products to the government is detrimental to maintaining export markets.”
The summary also notes that on Sept. 1, 2012, the Milk Income Loss Contract program is scheduled to revert to covering just 34% of the difference between the Class I base price and $16.94, (down from the current 45%) and the production covered will decrease from 2.9 million pounds to 2.4. “With increasing feed costs and shrinking margins, producers need a stronger safety net than current programs can provide,” says the summary.
FFTF would scrap the dairy price supports, Milk Income Loss Contract payments and reform Federal Milk Marketing Orders. In their place, FFTF would offer a government-funded margin protection program which would provide a floor for income over feed costs at catastrophic losses and a supplemental program where producers could purchase additional coverage.
The draft legislation would provide catastrophic loss protection on 75% of a producer's base milk production. The original FFTF plan would have provided 90% coverage. The Congressional Budget Office scorers found that a lower level of protection is needed to keep the proposal within current spending limits. 
The much more controversial part of the plan is the Dairy Market Stabilization Program, which would trigger milk-feed when margins fell below $6 for two consecutive months. When they do, producers would receive payment for 98% of their base milk marketings.  Milk payment withholds would increase up to 4% if margins fell below $4 for a single month. There would also be caps in place for dairies that have expanded since the base period.
“This is a long-anticipated and very welcome next step in the process of upgrading dairy policy to better provide farmers with protection, stability, and the opportunity for growth,” says Jerry Kozak, President and CEO of NMPF. “We appreciate the attention that Congressman Peterson has brought to this issue, and we will be working with him and his colleagues on Capitol Hill to help advance and implement the concepts of Foundation for the Future.” This week, NMPF started its 12 town tour explaining the program to producers.
International Dairy Foods Association President and CEO Connie Tipton said in a statement "We are disappointed that Rep. Collin Peterson today circulated draft legislation that clearly would take the dairy industry in the wrong direction.
"Instead of encouraging job growth and reducing regulation on an already overregulated industry, the discussion draft would impose new and intrusive government mandates into dairy markets at the cost of a growing dairy export business and the jobs that have come with it."
For the complete House Ag Committee summary, click here.

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