NMPF’s Dairy Policy Changes
Sep 29, 2009
By Jim Dickrell
The National Milk Producers Federation (NMPF) Strategic Planning Task Force announcement last week is welcome news.
At least now we have some idea of the direction of the plan, though the details are skimpy at best. But the kicker is this: No revisions to U.S. dairy policy will move forward without NMPF endorsement.
It’s not that NMPF can dictate to Congress what dairy policy should be. Rather, Congress is so sick of dealing with dairy issues over the past 20 years that it will simply not act unless an overwhelming majority of dairy producers support change. NMPF, and only NMPF, can bring that cohesion.
NMPF officials will be here at World Dairy Expo this week. The Dairy Today reporting team will press them hard for details on their plan. At this point, we can only speculate as to what those details will be.
- Revamping the safety net of Dairy Price Support and the Milk Income Loss Contract programs. When the Reagan Administration ratcheted back the support program from $13.10 down to $9.90, it essentially backed down government support from 100% of the cost of production to 75%. Now, with cost of production at roughly $16, the $9.90 represents barely 60% of cost coverage. And with feed costs responsible for the biggest portion of costs, the $9.90 wasn’t evening covering feed if dry cow and replacement feed costs are included. That suggests the new price support floor should be set at about $12, especially in light of the fact that it is government ethanol policy that has driven up feed prices.
USDA says the MILC program will pump an additional $1 billion into dairy producer pockets through the 2008/2009 this fiscal year, which ends tomorrow. Since February, the MILC payment has averaged $1.66/cwt, with an average of 14¢ of that coming from the new feed adjustor. While producers often scoff at the feed adjustor given high feed prices, and sometimes at the MILC payment itself, I have not heard of any producer who has failed to cash their MILC checks this summer.
But MILC remains controversial, partly due to the 2,985,000 lb. payment cap. MILC is geared toward the smaller producer. Large producers, those with 1,500 cows or more, got one and their done MILC payment last spring. Is this fair?
The question is: Would producers be willing to give up MILC for a higher support price that would benefit all?
- NMPF is also proposing a new dairy producer income insurance program. Livestock gross margin-dairy insurance already exists, but few use it because of its complexity. Penn State analysis shows it is a good deal, if it is used consistently. . Simplifying it, and perhaps offering some government help on premiums, might increase use.
- Cooperatives Working Together has been a fairly popular program among participating producers, but NMPF recognizes the 30% free-rider program. And while CWT has removed 231,000 cows and bred heifers in 2009, total slaughter is up just 217,000 head. That suggests that herds that weren’t culled through CWT have actually reduced their voluntary culling. Hmmm.
- NMPF’s final target of reform is the Federal Milk Marketing Order system. Of all the NMPF reform targets, this will be the toughest nut to crack. There has never been agreement, even within cooperative ranks, as to what changes are acceptable. Perhaps the dire economic crisis of the past seven months has sharpened thinking.
Specifically, NMPF proposes eliminating make allowances. While guaranteed make allowances are unpopular with some producers, dairy manufacturers will still need them to stay in business whether they’re implicitly calculated in the formulas or not.
The coming days will be interesting as NMPF releases details of its plan. As soon as we know, you’ll know.