Dairy Security Act Stirs Up Controversy

A bill was introduced recently in the House of Representatives that aims to revise milk price supports in the United States.  Democrat Collin Peterson of Minnesota and  Republican Mike Simpson of Idaho introduced the Dairy Security Act of 2011.  The bill provides dairy farmers with the option of purchasing margin insurance that is designed to provide payment to farmers when the margin between milk price and feed price decreases below a certain threshold.  For those purchasing margin insurance, the bill also requires enrollment in a Dairy Market Stabilization Program intending to reduce milk production during low margin time periods.  The bill is already is stirring up controversy. 

The National Milk Producers Federation offered its support for the bill:

The Dairy Security Act (DSA) bill is somewhat different from the legislative discussion draft introduced by Peterson this summer, in that it now makes voluntary the Dairy Market Stabilization Program (DMSP), which will help reduce milk output during times of low margins. However, if dairy producers wish to elect to enroll in the subsidized margin insurance program through the U.S. Department of Agriculture, they will automatically be enrolled in the Dairy Market Stabilization Program so that they are promptly alerted when additional production may affect their overall margins.

The new legislation is also an improvement over the earlier version, according to NMPF, because extends the Basic level of margin insurance coverage to 80 percent of a producer’s production history, from 75 percent as initially proposed. The Supplemental margin coverage option is also improved, as it will now allow producers to purchase insurance for growth in their milk production history.

Other changes to the final version of the legislation include a refined provision in the Dairy Market Stabilization Program to ensure that it does not activate during times when signals for farmers to reduce production may impinge on the ability of the U.S. to export dairy products.

Meanwhile, other dairy industry trade organizations have already lined up to critisize the bill.  The Wisconsin Dairy Business Board wrote to Senate and House Committees on Agriculture:

We are becoming increasingly alarmed that policy makers and elected officials believe there is consensus in the dairy industry on proposed dairy policy.   There is not, and we hope that these letters will serve as evidence that while we agree that dairy policy reform is necessary, it must not come at the expense of farmers and others who rely on the industry for their livelihood.

Dairy farms are important to our communities, our families and our economy.  And the growth of dairy in our regions has expanded jobs and created potential in our industry for the next generation of dairy farmers.

Some farmers feel that a government run ‘supply management’ program would help make sure all farmers stay within historical production limits and that this would help keep prices at profitable levels.   We strongly disagree with this approach, and oppose any regulations designed to manage the milk supply by requiring all farmers to reduce their production.

The Wisconsin Dairy Business Board is joined by the Board of Directors of Bongards’ Creameries (Minnesota), Minnesota Milk Producers Association, First District Association (Minnesota), Alliance Dairies (Florida), Dairy Business Milk Marketing Cooperative (Wisconsin), Dairy Policy Action Coalition, High Desert Milk (Idaho), National All-Jersey Inc. (Ohio) and the Northeast Dairy Producers.   The full text of the letter can be found here.

Both sides agree on one thing--the time has come to reform the way milk is priced in this country.  But figuring out how that should be done will lead to a lot more debate.

By Todd J. Janzen