Vandenheuvel: Major dairy developments in Washington, D.C.
U.S. Senate Ag Committee Unveils Their Draft of the 2012 Farm Bill
MPC Joins Dairy Organizations/Cooperatives from Around the U.S. in Support
By Rob Vandenheuvel
In announcing their markup, Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Michigan) released a draft of the 2012 Farm Bill, which included dairy provisions modeled after the “Dairy Security Act” (a.k.a. DSA, H.R. 3062 or the “Peterson-Simpson Bill”). In short, the draft Senate Farm Bill includes the two
main pieces of the DSA, which are:
- Dairy Producer Margin Protection Program (DPMPP) – This is commonly referred to as the “insurance” part of the bill. Under the DPMPP, a producer could choose to enroll in a direct-payment program run by the U.S. Department of Agriculture. The basic program (which would come at no cost to individual dairies) would provide cash payments directly to dairy farmers when the national “margin” between milk prices and feed costs dropped below $4.00 per hundredweight. In other words, when the average milk price across the country drops to less than $4.00 per hundredweight over the “feed cost calculation” (a formula that incorporates national values of corn, soybean meal and alfalfa), a payment would be made to all dairymen enrolled in the program. Unlike the MILC program, this insurance program would not be capped at a specific volume of milk – instead it would cover 80% of the “historical production” of each dairy facility (which would be determined by the highest annual production for each dairy over the past three years). In addition, a supplemental program would be available for dairies that wish to generate payments from the program at higher margin levels. In other words, an individual dairyman could choose to customize the program so that a payment is generated whenever the price of milk is less than $5.00 per hundredweight above the feed cost calculation. Or $6.00. Or $7.00. This additional coverage would include an annual premium paid by the dairy farmer. The supplemental program could be customized to cover up to 90% of a dairy’s annual production.
- Dairy Market Stabilization Program (DMSP) – This is commonly referred to as the “market management” part of the bill. The DMSP would only apply to dairies that choose to enroll in the insurance program outlined above (the DPMPP). If a dairy is enrolled in the DPMPP, they would be automatically part of the DMSP. Under the DMSP, when the margin falls below $6.00 per hundredweight for two consecutive months (the national average price of milk falls to less than $6.00 per hundredweight above the feed cost calculation), USDA would notify the dairies enrolled in the DMSP that in the following month, they would only be paid for 98% of their “base production” (which can be determined by either the dairy’s production three months leading up to that point, or the production in the same month the prior year). Milk produced above that level by a dairy enrolled in the DMSP would still be paid for by the milk handler, but these dollars would be diverted to a fund used to buy excess dairy products to be donated to food banks and feeding programs. If the margin continues to fall below $5.00 or $4.00 per hundredweight, the DMSP would adjust to only pay enrolled dairy farmers for 97% and 96% of their “base production.” At no point would the DMSP authorize payments below 96% of a dairy’s base production. Once the margin recovers to above $6.00 per hundredweight for two consecutive months, the DMSP is de-activated and all calculations of “base production” are eliminated. If the DMSP re-activates at a later time, the calculations will re-start from scratch.
A few modifications from the original “Peterson-Simpson Bill” also surfaced in this Senate draft of the Farm Bill. These modifications were largely known to those who have been following this process, and have played a key role in helping build additional support among the dairy industry for these policy changes. Two of the most notable modifications include:
The proposed reforms to the Federal Milk Marketing Order regulations are not included in the Senate draft. Dairies choosing to enroll in the “supplemental” portion of the Dairy Producer Margin Protection Program would be subject to a lower premium on the first 4 million lbs of milk produced per year. This lower premium would be available to all dairies, regardless of size.
While some other differences exist from the original “Peterson-Simpson Bill,” the fundamental structure of the policies included in the Senate draft remains unchanged.
While the two Houses of Congress have been busy, so have dairy organizations and cooperatives from around the country. This week, Milk Producers Council (MPC) joined 28 other organizations/cooperatives in sending a joint letter to the Senate Ag Committee members urging them to support the DSA provisions outlined above as the dairy portion of the Farm Bill. The groups, which represent a vast majority of the milk produced throughout the U.S., include:
- Agri-Mark
- Alabama Dairy Producers
- Associated Milk Producers Inc. (AMPI)
- Dairy Farmers of America (DFA)
- Dairy Farmers Working Together
- Dairy Producers of New Mexico
- Dairy Producers of Utah
- Dairylea Cooperative Inc.
- Ellsworth Cooperative Creamery
- Holstein Association USA, Inc.
- Idaho Dairyman’s Association
- Iowa State Dairy Association
- Land O’Lakes
- Maryland Dairy Industry Association
- Michigan Milk Producers
- Midwest Dairy Coalition
- Milk Producers Council
- Missouri Dairy Association
- National Council of Farmer Cooperatives
- National Farmers Organization
- National Milk Producers Federation
- Northwest Dairy Association / Darigold
- Oregon Dairy Farmers Association
- South Carolina Dairy Association
- South Dakota Dairy Producers
- St. Albans Cooperative Creamery
- United Dairymen of Arizona
- Upstate Niagara Cooperative, Inc.
- Washington State Dairy Federation
The letter (which can be read at http://www.milkproducerscouncil.org/041912coalitionletter.pdf) said that, “The Dairy Security Act is an update to our safety net policies for the 21st Century. It provides flexibility and options for each individual dairy. Not only can the provisions in the legislation be customized to each dairy, there is also the option for any dairy to completely exempt itself from the programs. The authors of the DSA recognized that a one-size-fits-all approach simply doesn’t work in our modern industry and have cooperated fully with our organizations in making further improvements to broaden the support for the dairy reform package.”
The letter went on to say that, “As the list [above] clearly shows, the U.S. dairy industry is demonstrating a level of unity and support for the Dairy Security Act that is unprecedented for our industry. These organizations share the belief that the status quo is not an option for our future, and we stand united behind the Dairy Security Act as a rare opportunity for the dairy industry to collectively support reasonable, sound changes to our Federal policies.”
This week’s progress in moving forward with much-needed reforms to our Federal safety net policies for the dairy industry is the latest culmination of years worth of work. Regular readers of this newsletter will recall that MPC has been actively involved in developing and promoting reforms to our dairy policies. It started in 2007 with MPC’s development of the “Growth Management Plan.” Those efforts helped set the stage for the introduction of H.R. 5288/S. 3531, also known as the “Costa-Sanders Bill.” While that legislation was ultimately unable to garner enough support in the Legislature to be approved, it was a key factor behind some of the provisions included in Foundation for the Future, a legislative proposal outlined a couple years ago by the National Milk Producers Federation. Fast forward to today: those provisions are the backbone of the dairy policies that are included in the Senate Ag Committee’s version of the 2012 Farm Bill.
While this has been a long and laborious process (most legislation is), MPC is proud to stand side-by-side with the organizations listed above in moving forward with the dairy policy changes outlined above. It should be noted, however, that much work still needs to be done. Opponents of this package of policy changes – most notably the International Dairy Foods Association (IDFA, which represents many of the nation’s dairy product processors) – are in full force trying to kill some/all of the dairy provisions being promoted. Specific to IDFA, there is a deep-rooted dislike for any policy that would empower dairy farmers to collectively respond to supply/demand imbalances with quick and temporary changes in milk production. As dairy farmers, if we want the U.S. Congress to provide the nation’s dairy farmers with those valuable tools, we need to fight for them. Dairy families that support the pro-producer provisions outlined above need to pick up the phone and contact their elected officials.
Start with your Senators; call both of your State’s Senators and urge them to support the dairy provisions outlined by the Senate Ag Committee. Opponents of this legislation have been and will continue to be making calls, urging our elected officials to reject the dairy provisions. Don’t let them speak for you! Your silence hands IDFA and others who are opposed to this legislation the power to kill this rare opportunity. We’ve reached a critical point in this process, so please: Pick up the telephone! If you need help contacting your elected officials, feel free to contact Milk Producers Council at (909) 628-6018.