#Farm bill draft includes Dairy Security Act

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icking up where we left off last year, a farm bill with dairy policy reform is on its way. Packaged as the Dairy Security Act, some groups are singing the praises of this combination of margin insurance and supply management, while others are disappointed it the House Ag Committee’s failure to strike the controversial production stabilization mechanism, the Dairy Market Stabilization Program (DMSP).
NMPF CEO Jerry Kozak offered his organization’s support for the action that occurred late last week.

“The National Milk Producers Federation (NMPF) is pleased that the farm bill unveiled (last week) by the House Agriculture Committee contains dairy program reform provisions based on the Dairy Security Act (DSA),” he said. “These are the same provisions that were included in last year’s bill that the committee approved. The DSA updates the badly frayed dairy safety net, and it enjoys strong support among dairy farmers nationwide.”
Kozak went on to tote the DSA as both a favor to dairy farmers and a cost-saving solution for tax payers.
“In addition to providing dairy farmers an effective safety net, the DSA is fiscally responsible. The alternative to the DSA, expected to be offered by Reps. Goodlatte and Scott, is unfortunately not fiscally responsible and could return us to the bad old days of huge price-depressing dairy surpluses,” Kozak said. “Goodlatte-Scott would guarantee cheap milk for processors while dulling market signals to farmers through margin insurance payments. If milk prices fall sharply or feed costs soar – both common occurrences in recent years – government costs of the dairy program could spiral out of control.”
The passing of this provision came at the disappointment of some other dairy organizations. The International Dairy Foods Association (IDFA) had urged for a compromise that included margin insurance but did not limit production. The Dairy Freedom Act, presented by House Agriculture Committee members Representatives Bob Goodlatte (R-VA) and David Scott (D-GA), would have achieved just that.
Jerry Slominski, IDFA senior vice president for legislative and economic affairs, explained how this proposal would have satisfied his group’s members, which account for 85 percent of the milk, cultured products, cheese and frozen desserts produced and marketed in the United States. “This bill mirrors everything in the Dairy Security Act except the hugely divisive supply management provision, which is opposed by a broad and deep alliance of consumer groups, anti-tax groups, food and restaurant groups, many dairy producer groups and dairy food manufacturers,” he said.
Earlier this month, more than 30 of those dairy foods manufacturers joined together in requesting that their states’ respective representatives reject the DSA as written in the bill. Several Wisconsin-based companies addressed Representatives Sean Duffy (R-WI), Ron Kind (D-WI), Gwen Moore (D-WI), Tom Petri (R-WI), Mark Pocan (D-WI), Reid Ribble (R-WI), Paul Ryan (R-WI) and Jim Sensenbrenner (R-WI). Those manufacturers included Lactalis American Group; Saputo Cheese USA; Bel Brands USA; Grande Cheese Company (Grande Custom Ingredients Group); Galloway Company; Sargento Foods Inc.; Arthur Schuman, Inc. (Imperia Foods); Sartori Company; Agropur Inc.; Dean Foods (Morning Glory Dairy, Verifine Dairy Products); and Great Lakes Cheese Co., Inc.
The Dairy Business Association (DBA) is also adamantly opposed to supply management. “As an organization comprised of both dairy producers and processors, we are in a unique position to explain why the Dairy Freedom Act is the best option for all of us in the dairy industry,” wrote Jerry Meissner, DBA board president and owner of Norm-E-Lane, Inc., a 2,000-cow operation near Chili, in a letter to House and Senate Ag Committee leaders last week. It is expected that the topic of dairy policy reform will be taken up again.
How will DSA affect Wisconsin dairy farms?
According to NMPF, had the DSA been in place during economically challenging 2012, dairy producers who participated in the voluntary program would have come out ahead. For a 200-cow dairy, which is slightly larger than the average Wisconsin dairy with 105 cows, net revenues would have been over $50,000 for a participating producer who chose to reduce production. That would have been equivalent to an increase of $1.20 per hundredweight on all milk produced on the given farm. If that same size farm had chosen not to cut production and instead paid the deduction, net revenues still would have posted an increase of an estimated $45,000 for 2012, or $1.06 per hundred weight. These calculations are based on the national average of 21,000 pounds of milk per cow per year and actual 2012 All Milk prices.
Last year, the stabilization portion of the DSA would have been in effect from May through September, triggered by the milk-feed margin dropping below $6.00 for two consecutive months, as calculated by USDA. Production adjustments are based on either the same month of the previous year to reflect seasonality of production or the average milk produced during the three months prior to when stabilization goes into effect. NMPF’s calculations show that not cutting production during this time would have resulted in a deduction of just over $3,000; however, limiting production would reduce feed costs by around $2,500, leading to the net increase in revenue previously noted for the 200-cow dairy example.
Participating in reducing milk production is the choice of the producer. Choosing not to make an adjustment would result in a milk price deduction. The goal of both of these actions is to minimize margin recovery time. This portion of the program is only activated when the margin drops below a specified level for two consecutive months.
The less controversial portion of the DSA is the margin protection program. If the DSA had been in effect last year, participating producers would have received margin protection payment at the basic $4.00 margin level, and if they had purchased additional coverage, at the supplemental level as well. At the basic level, 56 cents would have been paid out for May-June, and $1.14 for July-August. If the dairy producer had signed up for an additional $2.50 of supplemental coverage over the $4.00 level that is offered, this would have resulted in $1.91 payout per hundredweight for March-April, and $2.50 per hundredweight for both May-June and July-August.
Source:  Agrview

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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