As more details emerge on the National Milk Producers Federation's 2012 dairy policy proposal, there's a lot to like:
Dairy Producer Income Protection Program. Patterned after Livestock Gross Margin for Dairy, it provides fully subsidized margin insurance—the difference between the U.S. All-Milk price and national feed cost. Level of coverage will likely fall between 75% and 90% of a farm's milk production the year prior to enactment. No payment, production, region or size limits. Supplemental insurance can be purchased at a subsidized premium.
Federal Milk Marketing Orders. Maintains Class I and II Orders and uses a competitive pay price to establish a Class III, ending complex formulas and make allowances. Class IV pricing is still under development. This is a disappointing backslide; the original proposal had Class I for fluid and all other products in a manufacturing class.
Dairy Market Stabilization Program. Triggers based on milk price minus feed cost margin comply with World Trade Organization rules. If a trigger is reached, producers receive no payment for milk production above 99% of a farm's base production; triggers for 98% and 97% are also set. Processors transfer money from the 1% to 3% unpaid milk to USDA to increase dairy product disappearance via feeding programs, school nutrition, exports, etc.
This is the weakest link in the proposal, since a 1% to 3% cutback in milk price probably won't discourage production. The upside: dollars flowing into USDA would be used to increase consumption.
Cooperatives Working Together (CWT). Remains voluntary, but requires a two-year sign-up with a commitment of 1.5¢/cwt to 3¢/cwt. The goal is to collect $40 million annually: $30 million targeted toward exports and $10 million for the domestic program. Processors can bid for CWT assistance to make products such as casein and milk protein concentrates to compete with imports.
All in all, the proposal shows forethought and creativity. NMPF hopes to have the plan fleshed out for board approval in June. Then the real work begins, as it tries to sell the program to producers, processors and Congress.
NMPF's Foundation For the Future