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FFTF's impact on our farm; some questions remain


Editorial: July 2011 page 454

As we assess the entire Foundation for the Future (FFTF) policy package, among many other things, we wanted to know how it would affect our business and yours. Since we wanted to use actual numbers, we had the National Milk Producers Federation staff assess FFTF's impact on the Hoard's Dairyman Farm had the plan been in effect from January 2009 until the present. (See page 451.)

We have been growing our herd and did not assume any cutback in milk sales when the stabilization program was in effect. We would have had deductions from our milk checks of more than $17,000. However, according to the NMPF analysis, higher milk prices resulting from the market stabilization program would have given us greater milk income overall.

We chose to purchase supplemental insurance under the margin protection plan to cover $2.50 per hundredweight of margin on 90 percent of our milk. That was on top of the $4 basic (no fee) coverage. Our premiums would have been just under $31,000, and we would have been paid $55,000.

Total benefit to our farm from both programs, according to the NMPF analysis, would have been $146,760 or about $1 per hundredweight. That suggests the program would have been good for us. We think it would have been good for the vast majority of our subscribers.

On that basis alone, we would fully support FFTF. It is the most comprehensive and most analyzed dairy policy option being considered.

Still, there remain some unknowns, and, of course, we still haven't seen the exact legislation. We have submitted a number of questions about FFTF to be answered by the NMPF staff. Some of them have been raised by subscribers, and some have come from our staff. We will be sharing answers to those questions in the magazine as space permits and on our website. Undoubtedly, there will be more questions raised at the FFTF meetings that will be held across the country this summer. We, and the industry, await the final details.

Main plans being considered would reduce volatility


Editorial: October 25, 2010 page 700

Getting away from the wild swings in milk prices that we've been experiencing has been one of the primary policy goals of many in our industry. In fact, addressing milk price volatility is one of the main assignments given to USDA's Dairy Industry Advisory Council.

Providing more stable milk prices also is among the goals of major dairy policy plans being considered. They are Agri-Mark's Marginal Milk Pricing plan, the Costa/Sanders bill, and National Milk's Foundation for the Future (FFTF) which includes a market stabilization program.

Agri-Mark's plan kicks in when the net farm price falls below a certain point. People would get Class III price for milk above their current base level. Penalty revenue would be used to purchase cheese. In Costa/Sanders, the Milk-Feed Price Ratio is the trigger, and people who expanded would have the option of paying a market access fee on new, additional milk or all of their milk. Money would be returned to those who did not boost milk. National Milk's plan uses milk-price-less-feed-cost margin as the trigger. Monies collected would be used to build product demand here or abroad.

All three of these plans would reduce milk price volatility significantly. This was the finding of an analysis by dairy economists Chuck Nicholson at Cal Poly and Mark Stephenson at the University of Wisconsin-Madison.

Even with a large market shock of one type or another, the three plans reduced volatility of the All-Milk Price from $1.75 per hundredweight to between $1.13 and $1.26 per hundred. The shocks used were a big change in feed prices or export demand.

Agri-Mark's plan and National Milk's FFTF were most likely to improve the All-Milk Price. Those two plans, due to cheese purchases with monies collected, would enhance Class III price an average of 45 cents and 57 cents between now and 2018. With the Costa/Sanders bill, monies collected are returned to producers who did not expand.

Here, we're sharing preliminary information from the analysis. More details will become available over time. You can bet this analysis and others that will be made will be cussed and discussed plenty. But Nicholson and Stephenson are experienced at this type of analysis, and their work must be taken seriously. It is important that all dairy policy plans under consideration be given careful and objective study. Only then can dairy industry leaders come to some informed, rational consensus.

"Give us cheap milk and lots of it!"


Editorial: August 25, 2010 page 556

We're not surprised the International Dairy Foods Association opposes attempts to curtail milk production during times of surplus. However, we were surprised how quickly and how blatantly IDFA responded to National Milk's release of its Foundation for the Future proposals, including the market stabilization portion.

Here's is what IDFA said. "Supply management will destroy our dairy industry's opportunity for the future." The processor group called on dairy producers, dairy co-ops, and even cattlemen to "defeat supply management for the U.S. dairy industry." It even went so far as to say the current proposals involve government mandates, assign quotas to dairy farmers, and impose a tax on them.

At some level, we're embarrassed for IDFA and its reaction. The organization might as well have put out a release saying, "We want cheap milk and lots of it!"

We wonder if IDFA has even read National Milk's dairy market stabilization proposal or the Costa bill. We're not talking quota system here. For example, the NMPF proposal, patterned after what some refer to as the Agri-Mark approach, simply says that, when income over feed cost falls below a certain level, those who are shipping more milk, based on a three-month rolling average, would receive less for their milk. As long as income over feed cost stays above a certain level, everyone can produce as much milk as they wish without any price penalty. In other words, if there is need for milk, the market stabilization plan is not going to slow normal growth in output.

Policies that provide rock-bottom milk prices have always been IDFA's unabashed position, but usually they've been more subtle and professional about it. We can assure IDFA's staff and members that there will be plenty of milk. (They just might have to open their wallets a little more to pay for it.) Yes, there will be plenty of milk. The big-picture question for our industry, processors, and consumers is where the milk will be produced, and who will produce it.

Editorials written by Hoard's Dairyman, The National Dairy Farm Magazine, on the National Milk Producers Federation Foundation for the Future program.

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