Updated: Dairy Supply Management Could Affect States Differently

November 6, 2013 03:43 AM

Update: National Milk Producer Federation reaction to Bozic study, released late today, is listed at bottom of story.

As they say, life happens. The same will be true whether new dairy policy includes a market stabilization program or not.

Analysis by Marin Bozic, a University of Minnesota dairy economist, suggests that even though the rules will be applied nationally, dairy market stabilization program (DMSP) could affect states differently.

He examined milk production changes by state retrospectively from January 2008 through July 2013. During that period, the market stabilization program would have required production reductions in 16 of those 66 months. "It would appear that the DMSP is well timed, as it nearly always coincides with declines in national milk production growth," he says.

But states might be impacted differently. For example, Bozic found Minnesota milk production declined in only two of those 16 months. That’s likely because Minnesota dairy farmers grow most of their own feed, and have lower feed costs. In contrast, California milk production declined in 14 of the 16 months—likely because California producers purchase more of their feed.

"This suggests that while both Minnesota and California might have equal imposition of penalties, Minnesota might have a much higher burden of adjustment. [Minnesota] producers would be forced to cut back milk supply which they otherwise would not do," he says.

"In contrast, due to their different business model, it is possible that many producers in Western states would be reducing milk production anyway," Bozic says.

Bozic has created an interactive graph for the 23 major dairy states to show milk production. You can view the graphs here.

The National Milk Producers Federation has reacted strongly to Bozic's study. Here's a statement, part, NMPF released this afternoon.

"Every farmer in the U.S. -- no matter where they live -- is treated equally under the Dairy Security Act (DSA). There is no greater "burden", to use the paper’s term, on a dairy producer in one state vs. a producer in any other state under the DSA. Bozic’s claim is that market stabilization could impose a higher burden on states whose milk production was growing during recent, historic periods when DMSP would have been activated, compared with states whose milk production grew more slowly, or declined, during such periods. But the historical movement in state milk production numbers has nothing to do with the decision any individual dairy farmer in any state will make on whether to participate in the DSA."


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