Producers question reforms
NMPF officials defend proposal to rewrite federal milk programs
By STEVE BROWN
OLYMPIA -- Dairy farmers raised questions July 12 about the massive rewrite of key federal dairy programs proposed by the National Milk Producers Federation.
Aaron deBoer, a third-generation dairy farmer from Burlington, Wash., voiced his concern that the proposal, called Foundation for the Future, might hinder export growth opportunities.
Jerry Kozak, president and CEO of the federation, said the first priority is to stabilize the U.S. market in a way that would minimize its impact on exports and not allow more imports.
Foundation for the Future is designed to address the margin between milk prices and feed costs, Kozak said. "We've been trying to chase prices for 60 years, and it's not working."
If world dairy prices are 20 percent above or below domestic prices, the proposed dairy market stabilization program wouldn't trigger at all, he said.
"We're not going to stop imports," he said. "The way things are going, we're going to see less and less barriers."
Jim Tillison, a senior vice president at the federation, said imports have been dropping anyway because demand in China, India and other developing countries "is going up 10 to 12 times faster than in the U.S."
Dairyman Bob Baker asked if participation in the program would be voluntary.
Kozak said the stabilization program would be mandatory across the U.S. He likened it to a smoke detector: When margins begin to slide -- such as in 2009, when overseas demand collapsed and feed costs soared -- producers would be encouraged to reduce milk marketings by a small percentage for a short time in an effort to increase prices and margins.
"The adjustment is temporary," Tillison said. "It's designed to react quickly, then get the hell out of the way."
The plan's Dairy Producer Margin Protection Program insurance would be voluntary, Kozak said. This federal insurance policy would cover catastrophic losses, such as occurred in 2009, he said. Basic coverage, at no cost, would guarantee a $4 per hundredweight margin protection for up to 90 percent of a farm's historic milk production base. Supplemental coverage could be purchased to cover an additional $4 per hundredweight.
The program is intended to replace current federal safety net programs.
Parts of the federal milk marketing orders would also be reformed under the proposal, Tillison said.
"Milk prices are too volatile," he said. "This reform replaces end-product price formulas with a competitive price system."
The number of milk price classes would be reduced from four to two: fluid and manufacturing. Many other elements of the marketing orders are left as they are, including Class I differentials and marketing order areas, he said.
Language for the proposal has been submitted to the House Agriculture Committee, and the Congressional Budget Office has found "significant savings" in it, Kozak said.
"It's not a lock," he said. "But I'm comfortable this will move as a package through the legislative process. ... There may be some parts you don't like, but the package of reforms should help you."
The visit to Olympia was the first of 12 stops around the U.S. over the next six weeks. Other stops are listed on the website.