Reforms address concerns of some processors, dairymen

By CAROL RYAN DUMAS

Capital Press

The National Milk Producers Federation has made key changes to its proposal to reform federal dairy policy based on feedback from the industry and members of Congress.

Those revisions are reflected in the bill Rep. Collin Peterson, D-Minn., introduced in the House on Sept. 23.

The plan would replace current price support programs with a voluntary, federally subsidized margin-insurance program; add a stabilization program that would fund federal purchases of products when margins dip below a certain point; and would reform federal milk marketing orders.

Under the revised plan, participation in the market stabilization plan would no be longer mandatory unless a producer were to opt into the margin insurance plan.

Concerns in the processing sector and dairymen who opposed government intervention led to the change, said Jerry Kozak, president and CEO of the federation.

"We think we've struck the perfect balance between those who want to have some help from the government in those catastrophic times and those who don't want any government intervention in their business," he said.

The new approach will appeal to those who are philosophically opposed to government intervention, but farmers would have to make a conscious choice in the matter, said Randy Mooney, National Milk chairman and a Rogersville, Mo., dairyman. Government price supports would be eliminated under the proposal, and there would no longer be a price floor.

The federation expects high participation in the margin protection program and, therefore, high participation in the stabilization program, Kozak said.

"I think we are underestimating the business acumen of dairy farmers. I have no doubt ... they are going to avail themselves of this margin protection program and this supplemental (insurance) program," Kozak said.

Farmers are concerned about their ability to get credit, and lending institutions will look favorably on a producer's ability to have margin insurance and his ability to manage his farm through supply management, he said.

Making the plan voluntary also provided a solution to producers' concerns that 50 percent of the revenue withheld from producers' milk checks under the stabilization program would go to the Treasury for debt reduction.

Now the entire amount can be used for product purchases for donation to feeding and nutrition programs, which would take product off the market and tighten supply, he said.

Farmers were also concerned the margin protection plan would not cover production growth. But the bill, which was revised to cover 80 percent of a producer's historic production, now offers a growth option in its supplemental producer-paid insurance plan. If producers take that option, their historic base is adjusted to reflect actual production if they expand but cannot decrease if they produce less than the newest adjusted level.

The federation also decided to leave federal marketing order reform to USDA, with a mandate to eliminate the make allowance to processors and replace end-product pricing, used to set minimum milk prices, with a competitive pay price for milk. Producers nationwide would then vote on the changes.

The proposal also now includes minor administrative fees to producers to make it more appealing to budget hawks, he said.

The revised legislation is expected to score even better with the Congressional Budget Office than Peterson's original draft legislation, which showed a savings of $167 million over five years, Kozak said.

"We're creating a better safety net for our farmers and also creating a savings for taxpayers, and that's a home run," he said.