Volatility in market created need for more stability

CAROL RYAN DUMAS

Capital Press

Proposals to change federal dairy policy led more than a dozen organizations to fund economic modeling of the implications of those changes.

Dairy industry players from across the country met in Chicago a few weeks ago for a presentation of the modeling and to hear preliminary results.

The modeling was done by Mark Stephenson, director of dairy policy analysis at University of Wisconsin, and Chuck Nicholson, associate professor of agribusiness at California Polytechnic State University.

The modeling primarily focused on the National Milk Producers Federation's proposal for the 2012 Farm Bill and companion legislation introduced by Sen. Bernie Sanders, I-Vt., and Bob Costa, D-Calif., focused on milk supply management.

Model co-creator Stephenson said he and Nicholson are in the process of readying a report for the funders of the project and he would be willing to speak in detail on their findings at a later date.

In general, "both of the programs, National Milk's and Costa's-Sanders', work. They will reduce price volatility," he said.

In addition, the modeling shows relatively light impact on prices and trade, he said. While they would moderate prices, they wouldn't enhance prices.

The interested and vested groups are planning another meeting in early September so the results can be shared with Ag Secretary Tom Vilsack's Dairy Industry Advisory Committee at its Sept. 23 and 24 meeting, said Rob Vandenheuvel, general manager of Milk Producers Council of California.

National Milk's plan proposes to overhaul federal milk marketing orders and replace the current government safety net with an insurance plan based on milk-feed margins.

"It gave us a little better understanding of how the model is constructed," said Michael Marsh, executive director of Western United Milk. "But we still feel there are still some challenges. Some of the results were kind of curious."

The goal of the modeling is to analyze policies aimed at reducing price volatility.

The presenters displayed results in real-time format and allowed those attending the meeting to shout out scenarios, with the researchers adjusting their displays accordingly, Vandenheuvel said.

"Unfortunately, these results are preliminary," he said.

Jim Krahn, executive director of Oregon Dairy Farmers Association, said the modeling is being refined.

"When it is completed, it will not only be comprehensive, it will be extremely informative to all," he said.

Jay Gordon, executive director of Washington State Dairy Federation, was not at the meeting, but said he's heard from people who were.

"From all accounts, it looks like a pretty good system," he said. "The computer system addresses the 'what ifs' of policy proposals."

If the model creators can get it perfected and it can help the industry evaluate those policy effects, it would be very beneficial over the next year or so before the farm bill push, he said.

This study was funded by a coalition of industry groups, including AgriMark, Dairy Farmers Working Together, Holstein Association USA, the Milk Producers Council of California, National Farmers Organization, Land-O-Lakes, Family Dairies USA and Northwest Dairy Association, among others.