WASHINGTON, D.C. -- Senator Lugar from Indiana gave NMPF's FFTF a platform in the Senate in early October. DPAC dairy producers found it interesting that NMPF hedged with the truth in the last paragraph of their press release as highlighted here:
The key dairy policy changes in the REFRESH bill include: replacing the dairy price support (DPPSP) and milk income loss contract (MILC) programs with a voluntary margin protection program that covers 80 percent of the producers’ production history when margins fall below $4 per hundred-weight; giving producers the option of whether to enroll in a market stabilization program; and reforming the Federal Milk Marketing Order system by moving to a competitive pay price.
But the truth is that producers will not have an option to enroll in the market stabilization. Their only option is whether or not to enroll in the margin protection, and in so doing they are automatically enrolled in the supply management.
The CBO has scored this as though 60% of the milk will be signed up for margin protection and the supply management that is required to be linked to it. This means the revised bill will force those producers to balance the supply for the other 40% of the U.S. milk that is not signed up PLUS the world supply.
In essence, a 3% cut would now require those signed-up producers to cut 6%. Since the supply management margin triggers are still changeable every two years, and the sign up sticks with the producer for five years... what do you think will happen to those producers over time?
If bankers drive the signup to secure credit (as is being acknowledged even by NMPF), then the government is picking winners and losers in the name of saving $131 million phantom dollars over 10 years with no calculation as to the real liabilities.
Analyses conducted by Dr. Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison and Dr. Chuck Nicholson, associate professor in the department of agribusiness at Cal Poly San Luis Obispo, shows results to the contrary. According to their analysis, Peterson's Dairy Security Act and the dairy portion of Lugar's REFRESH Act would reduce volatility, but would also reduce exports, reduce average milk prices and reduce net farm operating income. Of the size farms studied, those with 250 to 600 cows would be most vulnerable, seeing net farm income fall by up to 61% under the National Milk FFTF program as contained in the Peterson and Lugar legislation.
They analyzed the legislation with a 5% and a 50% signup rate, and they note that the negative impact on net farm income and exports becomes even more noticeable when even more farmers sign up for the so-called voluntary margin program tied to the so-called stabilization (supply management) program. Their analysis also shows costs to the government would be greater than indicated by the CBO score, and that the supply management portion - or dairy market stabilization program -- would be active 40 to 45% of the time.
The Dairy Security Act / Foundation for the Future is a pig in a poke that sets a pretty tough precedent. Look through our website news for more information on DPAC's position and other options for the future generations of dairy producers.
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