Dairy reform Bill would damage exports, warn processors

By Elaine Watson

- Last updated on GMT

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Dairy reform Bill would damage exports, warn processors
Draft legislation designed to create more stability in the US dairy industry would damage exports and threaten jobs, dairy processors have claimed.

International Dairy Foods Association (IDFA) president Connie Tipton was commenting on a discussion document/draft legislation on dairy reform circulated by Rep. Collin Peterson (Democrat, MN), who sits on the House Agriculture Committee.

Peterson: We could lose half our dairies

Peterson’s proposal - which has not yet been introduced to Congress as a Bill - is based on the National Milk Producer Federation’s (NMPF) Foundation for the Future plan and includes a dairy market stabilization program (DMSP) that would impose limits on US milk production during low margin periods (producers would not get paid for milk delivered above agreed levels).

This is designed to alert producers to market imbalances that dent margins and prompt them to adjust milk production accordingly.

Peterson’s document also proposes a margin protection scheme whereby federal support would kick in when a national margin tied to average US feed costs and all-milk prices dropped below a predetermined level.

The final strand of his proposal calls for a simplification of the current system in which milk is classified into one of four price categories depending on where it ends up (1 -bottled milk; 2 - ice cream, 3 -yogurt, cottage cheese; cheese; and 4 -butter and nonfat dry milk powder).

Peterson proposes just two categories: bottled milk and everything else.

IFDA: This would take industry in the wrong direction

But IDFA’s Tipton – who represents dairy processors - said the proposals would "clearly would take the dairy industry in the wrong direction” ​and damage US exports.

She added: "At a time when the world needs food and is demanding more dairy products, it makes little sense for our government to impose limits on milk production. The problem isn't too little regulation, it's too much."

In a paper published in late May examining the dairy market stabilization scheme, IDFA vice president and chief economist Bob Yonkers said: “Policies that attempt to manage volatility would limit industry growth and reduce US dairy exports at a cost of thousands of US jobs.”

Meanwhile, the inability of US dairy exporters to be reliable and consistent would encourage importing nations to look elsewhere, potentially causing a long-term reduction in dairy exports, warned Yonkers.

“It's clear that the DMSP would discourage investment in processing capacity in the US with similar long-term results in export capacity, particularly if program regularly triggers off and on, as expected.”

Reforms would create stability

Currently, the Dairy Price Support Program (DPPSP) allows the government to buy dairy products and store them for future sale, while the Milk Income Loss Contract Program (MILC) compensates producers when domestic milk prices fall below a specified level.

However, these schemes had failed to provide the safety net producers needed, argued Peterson. “As witnessed in 2009, when prices are high but margins are low MILC does not provide an adequate safety net to producers.

“These reforms would provide a safety net based on margin protection, rather than price… save taxpayer dollars, offer producers protection, create stability and inspire growth.”

He added: “We need to act before the next farm bill. If we have another dairy crisis like we had in 2009, we could lose half our dairies.”

Click here ​to read Peterson’s draft discussion document.

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