The International Dairy Foods Assoc.’s (IDFA) Jerry Slominski gave DairyLine listeners the “Processor’s Perspective” on supply management in Wednesday’s broadcast. He said that supply management is being touted by some as the remedy for price volatility in dairy, but IDFA and its membership are concerned that the industry is looking backwards. 

“Instead,” Slominski said, “I hope we focus on adopting changes that will allow the industry to innovate and grow by reforming our existing programs and adopting margin insurance and similar risk management proposals.”

Supply management programs have been tried and have failed around the world, according to Slominski, and “while supporters argue that we only need to rework some of the details of supply management, a new trigger here, a different way of imposing quotas there, and it will be different this time. But, truth is, supply management is a failed idea from the past that should remain in the past.” 

He pointed to what has happened in Canada since a quota system was adopted nearly 40 years ago. Since then, Canadian milk production has actually declined while U.S. production has increased by over 62 percent, Slominski said, and Canadians consume less dairy than before yet Americans are eating more dairy products overall. 

The argument that the Canadian quota system has saved their small farms is false, according to Slominski. Canada has seen the same steady decline in small farms in recent decades as we have here in the United States, he said.

“But, the most telling fact about the Canadian system is that Canadian companies are now investing in dairy facilities here in the U.S. and elsewhere because they can no longer grow in Canada,” Slominski said. “And, I just read how Canadian dairy farmers are buying operations in the U.S. because they can no longer tolerate having someone tell him how much milk they can produce.”

“2009 was a historically tough year for dairy farmers,” Slominski admitted. “But instead of adding an old idea of supply management to a patchwork of outdated and ineffective dairy policies, I hope we can support the good ideas that are out there – like risk management, that will help farmers get through difficult times.”

“The U.S. dairy industry faces a tremendous opportunity to grow, to innovate and produce new exciting dairy products, and to keep and create jobs and help our nation’s economy out of its current rut,” Slominski concluded. “We can do this if we allow everyone to compete and manage their farm businesses successfully, but not if the pessimists continue to spin the myth that the grass is greener north of our border.” Tell us your view on supply management at www.dairyline.com

National Milk proposal may help soothe economic woes
The University of Missouri’s Food and Agricultural Policy Research Institute (FAPRI) gave us their view on things. FAPRI completed an analysis of National Milk’s “Foundation for the Future” policy proposal and compared its likely impact to previous dairy market projections using current federal dairy policies.

Dairy Profit Weekly Editor Dave Natzke reported details in his Friday DairyLine report and said “The bottom line is, anyone expecting a big financial windfall under the proposal can likely forget about it. However, the plan should help smooth out the economic roller coaster dairy producers have been riding.”

FAPRI’s analysis projected results of eliminating current federal dairy policies, the Dairy Product Price Support Program (DPPSP) and Milk Income Loss Contract (MILC) program and replacing them with National Milk’s Dairy Producer Margin Protection Program (DPMPP) and Dairy Market Stabilization Program (DMSP). 

“National Milk’s plan should do what it is designed to do, according to FAPRI,” Natzke reported. “And that is to provide more financial protection in times of low income margins, like we’ve seen in 2009 and 2010, while keeping a lid on federal dairy payments.”

FAPRI said the current MILC program would begin to make payments sooner than the base insurance program but the margin insurance would provide larger payments, since 90 percent of a farmer’s milk production would be covered.

Currently, once the MILC is triggered, payments cover only 45 percent of the price shortfall, and that falls to 34 percent after September 2012. MILC also contains annual production caps, which aren’t included in FFTF. And, producers could pay for supplemental coverage to protect even higher income margins.

Addressing milk supply, FAPRI said National Milk’s supply management mechanisms would not be triggered often, but would likely hold annual milk production increases to less than 180 million pounds during the coming decade. “FAPRI said the National Milk plan would moderate, but not eliminate the volatility we’ve seen in dairy markets in the past few years,” Natzke concluded.