Margin insurance for dairy producers is in the home stretch with House passage of the conference committee’s compromise bill this morning.
The bill, which now must pass the Senate to make its way to the president’s desk, repeals the Dairy Product Price Support Program and the Milk Income Loss Contract and replaces them with federally subsidized insurance that protects producers’ margins of income over feed costs.
Divisions over proposed milk-supply management in the dairy portion of the farm bill were a major stumbling block for negotiators and was abandoned in an effort to get it passed.
“I wouldn’t say we’re happy with the outcome, but we’re satisfied with replacing the programs that haven’t worked with a new risk-management plan for dairy producers,” said Chris Galen, senior vice president of communications for the National Milk Producers Federation.
National Milk developed the margin insurance and market stabilization plan included in the Senate’s version of the farm bill.
The farm bill compromise does include a provision that might limit milk production, but it is not as influential as the market stabilization plan and it exposes future milk-production growth to the supply-and-demand roller coaster, he said.
That provision limits individual producers’ margin insurance to growth above their base that is no more than the national average annual increase, he said. The national average increase in milk production is about 1.5 percent a year, so a dairyman’s growth above that can’t be insured under the program, he said.
“We thought supply management was a good provision. It’s not in there, but we’ve known that for a few weeks,” said Bob Naerebout, executive director of Idaho Dairymen’s Association.
Regardless of which side anyone was on, everybody is glad a compromise was reached so the industry can move on to other critical issues, such as immigration reform, he said.
Washington State Dairy Federation is disappointed supply management was discarded, and Executive Director Jay Gordon said he sees the dairy policy glass as half full.
Margin insurance and supply management were designed to work together to reduce the cost of the insurance program and send producers a signal when there was too much milk. The absence of the supply management half is concerning in a downturn, he said.
“We shall see; we got what we got,” he said.
Global demand for dairy products is so strong at present that neither supply management nor margin insurance is needed in the short term. Hopefully the world will stay thirsty for milk, he said.
“We’ll keep our fingers crossed and hope we never get to the spot we say, ‘We could have used that,’” he said.
Western United Dairymen didn’t take a position on supply management but the organization is pleased with the margin-insurance aspect of the safety net, said Michael Marsh, Western United’s CEO.
The organization has been advocating a better safety net since the last farm bill in 2008, he said.
The dairy price support, which kicks in when milk prices drop to $9.90 per hundredweight, has long been irrelevant, and the MILC program with its production cap doesn’t much benefit large operations in the West, he said.
Margin insurance is a “vast improvement over the last safety net,” he said.
Supply-management opponents such as International Dairy Foods Association and Dairy Institute of California, which represent processors, did not immediately return calls.
IDFA’s Jerry Slominski, senior vice president for legislative affairs and economic policy, did issue a statement that reads: “The conference report is good news for consumers … who will not be forced to pay unnecessarily higher prices, and good news for dairy farmers who will receive an effective and efficient safety net to help them through hard times, without our government telling them how much they can produce.”
It will also allow dairy processors, particularly those who are exporting about 15 percent of the milk produced in this country, to continue to grow and create thousands of new jobs, he said.
Time will tell how effective the new safety net is and whether producers think it will work and sign up, said Charlie Garrison, a Washington, D.C., lobbyist for dairy producer organizations including Idaho Dairymen’s Association and Western United.