Radical New Plan NMPF proposal would change

February 23, 2010 10:03 AM


National Milk's new dairy policy seeks to put the U.S. on the road to compete globally.

After months of planning, Jerry Kozak, president and CEO of the National Milk Producers Federation (NMPF), has finally started to detail his organization's proposal to revitalize U.S. dairy policy for the 21st century.

Parts of the plan are bold and creative; others are head scratchers. "Everybody will hate something in our package,” Kozak acknowledges. "But that's a sign of a good program for an industry as diverse as ours.”

The program has three legs. Each is needed to support the other two, Kozak says.

1. Federal Orders reform. Class I would be retained for fluid milk and differentials, but only the differentials would be pooled. Classes II, III and IV would be collapsed into a single class; price formulas and make allowances eliminated; and manufacturing prices based on competitive bids. Reporting of competitive prices would be mandatory to ensure transparency and set a base for Class I prices.

2. Dairy Producer Income Protection Program (DPIPP) established. The Dairy Price Support and Milk Income Loss Contract programs would be eliminated and the savings used for a margin-over-feed-cost insurance program. DPIPP would pay an indemnity when margins fall to a certain level, either because of low milk prices or high feed costs. Participation would be voluntary, but government-subsidized for minimal protection. Producers would also be able to purchase additional coverage.

Eliminating the price support program would send prices to market-clearing levels. Kozak says current support levels have made the U.S. the balancing plant for the world, allowing lower-cost producers such as New Zealand to profit even with our $9.90 floor. Eliminating that floor to world prices will put all competitors on the same footing, he says.

3. Cooperatives Working Together (CWT) revitalized. NMPF is looking for ways to increase participation (currently at just 68%) and is considering making the program mandatory. New programs might include partial herd retirements and heifer buyouts.

Another option is a domestic product diversification initiative—fancy lingo for a program to promote U.S. manufacturing of products such as liquid casein, which is currently imported. Also being considered is an export marketing agency-in-common (stealing from the Kiwis' bag of trade tricks) and food bank assistance to move commodities to domestic feeding programs for the disadvantaged.

Final approval by the NMPF board could come as early as June; the goal is to get the package passed into law in the 2012 farm bill. Phased implementation will take years more.

Bonus content:

More on the National Milk plan


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