NMPF approves a revised approach to dairy policy reforms

Hoard's Dairyman: 

NMPF approves a revised approach to dairy policy reforms

Date: 
Thu, 09/22/2011

Farmers could opt in or out of dairy price stabilization efforts.

After listening to nearly 1,300 dairy producers in a dozen-city swing this summer, the National Milk Producers Federation’s board of directors approved some changes to their Foundation for the Future proposal on September 21.

A key change was modification to the Dairy Market Stabilization Program (DMSP). Under the revised proposal, dairy producers could choose whether or not to be involved in supply reductions during times of compressed margins either from low milk prices or high feed costs. However, if producers want to participate in the dairy insurance safety net known as Dairy Producer Margin Protection Program (DPMPP), they would have to participate in the supply program.

It is anticipated these changes, along with a few others, could end up in proposed legislation shortly. At the same time NMPF was holding its listening sessions across the country, Representative Collin Peterson (D-Minn.) was floating a discussion draft on this issue in the hallways of Congress. Since then, Representative Mike Simpson (R-Idaho) has become an earlier supporter of the potential dairy legislation.

Other recently adapted changes by NMPF to the Dairy Producer Margin Protection Program (DPMPP) are:
• The basic margin protection plan would cover up to 80 percent of production. (Original plan called for 75 percent.)
• The supplemental plan covers up to 90 percent of production history with a growth coverage option. Premiums still remain fixed.
• With growth coverage being a new addition under the supplemental plan . . . producer’s history could change as the production grows . . . only under the newly added supplemental plan.
• Production history remains fixed for the basic plan. However, production history can now be updated annually if the growth option is selected under supplemental coverage.
• Due to federal budget shortfalls, small administrative fees would be charged. They range from $50 to $500 per farm.

Key changes to the Dairy Market Stabilization Program (DMSP) are:
• As mentioned earlier, the plan now only applies to farmers choosing to participate in the insurance coverage offered by DPMPP.
• Since the program is voluntary, all money collected would go towards the purchase of dairy products. That would further improve effectiveness by reducing supply and bolstering demand.
• Changes were made to better reflect export markets: (1) When the margin is $6 or less and NASS Cheddar or NFDM price is equal to or higher than the FOB Oceania price for two consecutive months, DMSP is suspended; or (2) $5 or less and NASS Cheddar or NFDM price is 10 percent higher than the FOB Oceania price for two consecutive months, DMSP is suspended; or (3) $4 or less and NASS Cheddar or NFDM price is 20 percent higher than the FOB Oceania price for two consecutive months, DMSP is suspended. These export prices updates may not be initial legislation because the Congressional Budget Office needs to score them.

Lastly, the revised Foundation for the Future plan calls for evaluating federal order reforms through the hearing process . . . with one exception. There is a call to replace the use of end-product price formulas, including make allowances, with a competitive price for determining Class III milk prices. All other pricing provisions of current system remain unchanged. The plan only allows the hearing to consider this amendment through an expedited process which specifies that after USDA makes its decision, a majority vote by producers will put the changes into effect. If the changes are not approved, the current provisions remain in place.