Dairy Policy Reform Takes Shape

Representative Collin Peterson has introduced draft legislation based on a proposal called “Foundation for the Future,” which dairy producers developed on the heels of a crisis in 2009 when the U.S. dairy industry was hit by increased feed costs and a fall-off in world demand.  The new proposal would reform dairy policy by protecting the margin between what dairy producers pay for feed and the price they receive for milk.  Current dairy programs would be replaced with a new three-part policy that aims to keep dairy farmers from suffering catastrophic losses while keeping the industry competitive in the world market.  The legislation would provide federally insured coverage of 75 percent of a producer’s production history, while giving the producer an option to buy up to 90 percent coverage.  The legislation would also create the Dairy Market Stabilization Program, which would provide short-lived incentives for producers to cut back on milk when supplies are overburdened.  The program would develop signals to warn producers when additional milk production enters markets and threatens their margins.  In addition, the agriculture secretary would have the authority to purchase dairy products from commercial sources for donation to food banks and other sources.  Finally, the legislation would reform federal milk marketing orders to “simplify the basic system.”  It would eliminate complex pricing formulas used in the federal milk orders to determine the minimum price for milk under the current system of four separate classes of milk.  The four classes of milk would be reduced to just two, moving dairy pricing into a more competitive pricing structure. (Feedstuffs, July 18, 2011)