Why Dairy Reform Is So Darn Hard
Oct 23, 2011
Sen. Bob Casey’s “Dairy Advancement Act of 2011” limits costs by limiting the safety net to the first 150 cows in a herd.
At first glance, Sen. Bob Casey’s (D-Pa.) dairy reform package, “The Dairy Advancement Act of 2011,” seems like a common sense compromise for dairy policy reform.
Besides Federal Order reform and more mandatory price reporting by processors, it offers producers a choice: Milk Income Loss Contract (MILC) payments or Livestock Gross Margin-Dairy (LGM-Dairy) insurance.
Heck, even processors sing its praises: “We applaud Senator Casey’s inclusion of critically needed risk management tools, particularly his call for an expansion of the LGM-Dairy program. . . . LGM-Dairy is the type of program that our government should encourage,” says Connie Tipton, president and CEO of the International Dairy Foods Association.
Upon further review, of course, the devil is in the down and dirty.
The Federal Order reforms Casey proposes actually mirror what the National Milk Producers Federation (NMPF) originally proposed in the first drafts of its “Foundation for the Future” proposal.
These changes make a lot of sense because they take away a lot of the barriers to creating new products. Eventually, these changes will have to occur if the U.S. dairy industry hopes to compete internationally long term.
But National Milk and Rep. Collin Peterson, D-Minn., backed away from these reforms
simply because they would become a major distraction in getting any bill passed.
The Casey bill would also require stepped-up price reporting on a daily, weekly and monthly basis. Dairy folks in Pennsylvania, who were the main architects of the Casey legislation, seem obsessed with price reporting and market transparency.
One could argue, I suppose, that more frequent reporting will make for more accurate prices. Whether that makes a penny-a-pound’s worth of difference is debatable.
The biggest difference
under Casey’s bill
is the option producers have between MILC and LGM-Dairy.
If producers choose the LGM-Dairy provision, they would be eligible for insurance subsidies for the first 3 million pounds of annual production with a $1.50 deductible. Like MILC starting next Sept. 1, that would offer a safety net for the first 150 cows in a herd.
The problem, of course, is that herds larger than that get only partial coverage—and yet these larger herds produce in excess of 75% of the milk in this country.
The NMPF’s “Foundation for the Future” (FFTF) program, embodied in the “Dairy Security Act of 2011,”
(DSA) offers margin insurance to herds of all sizes provided they also agree to production limits in times of tight margins.
The DSA production limits are needed to rein in the cost of the program. Casey limits costs by limiting coverage to the first 150 cows.
DSA offers a safety net to everyone. Cooperatives recognize the MILC program leaves some 75% of milk production unprotected—a huge risk for producers and co-ops alike.
If federal spending wasn’t an issue, dairy policy would be easy. But deficit spending is no longer an option.
Anyone can propose change; getting that change enacted into law is an entirely different piece of cheese. That’s what makes dairy policy so darn hard.