Kozak Tells Panel that Dairy Farmers Need Improved Safety Net

WASHINGTON, DC – America’s dairy farmers need a dramatically revised safety net in the next Farm Bill, one that shifts its emphasis from milk prices to margins, the National Milk Producers Federation (NMPF) told a House of Representatives panel today.

At a hearing Thursday of the House Agriculture Subcommittee on Livestock, Dairy and Poultry, NMPF President and CEO Jerry Kozak (pictured at left) testified that in a globalized dairy industry, buffeted by increased price volatility, dairy farmers needs a new safety net “that addresses both low milk prices, high input costs, or the combination.”

Pointing to the collective loss of $20 billion in farmer equity that occurred between 2007 and 2009, Kozak said that current farm bill dairy programs are inadequate, considering the higher cost of production that livestock producers are facing, and will continue to face. With America’s farmers more reliant today on volatile export markets, better risk management tools are needed, Kozak said.

For that reason, NMPF has endorsed the Dairy Security Act (DSA), which was introduced in Congress last year by Rep. Collin Peterson, the ranking Democrat on the House Agriculture Committee, along with Rep. Mike Simpson, a leading congressional Republican. The DSA package “is proactive, budget conscious, and fixes long-term challenges that our current safety net can’t address,” he said, adding that because of its advantages, the legislative proposal is backed by the American Farm Bureau, the National Council of Farmer Cooperatives, the National Farmers Organization, the National Holstein Association, the Milk Producers Council, as well as a majority of other state dairy associations.

“This is an unprecedented level of support for such a major change, and has never happened before; shouldn’t this say something?,” Kozak asked.

The DSA replaces three existing farm bill dairy programs – the Dairy Product Price Support Program, the Milk Income Loss Contract program, and the Dairy Export Incentive Program – and uses the budget savings from those to help pay for the Dairy Producer Margin Protection Program.

But the margin insurance program “isn’t a guarantee of profits or success. Farmers won’t be able to insure all of their milk production, or all of their costs. This is first about protecting against the worst-case scenarios, and second about giving farmers the tools to help them manage their risk,” Kozak said.

Kozak cited several advantages to the approach taken by the DSA. Most importantly, it shifts away from a sole focus on milk prices, to insuring farmers against poor operating margins caused either by low milk prices or high feed costs. The Dairy Producer Margin Protection Program provides a no-cost basic level of margin insurance under the program, while offering farmers the option to purchase supplemental insurance to indemnify a larger margin.

“The DSA allows farmers to better manage their risks, offers a better safety net, reduces government involvement in our industry, and positions our entire industry to compete in a global marketplace. It is simple, affordable, and convenient,” he said.

Importantly, Kozak noted that the DSA is voluntary. The farmer “has a choice to accept a free basic margin insurance, as well as subsidized supplemental insurance, in which they share the costs with the government. As part of that agreement, they will be asked to manage their milk output through the Dairy Market Stabilization Program when worst-case conditions appear. Or, they can forgo government assistance, and not be subject to the DMSP.”

He pointed to the fact that the Market Stabilization program also contains triggers so that it does not activate when the world price and the domestic price are out of alignment, “a situation that could negatively affect the ability of the U.S. to export our products,” he said. Critics of the Market Stabilization program have said that the program will choke off dairy exports, but Kozak pointed to the ongoing financial commitment that America’s farmers make in both the U.S. Dairy Export Council and the Cooperatives Working Together program.

“Why would NMPF support a program that would negatively impact the investment of all those producer dollars?,” Kozak asked.

Kozak said the DSA would not raise consumer prices, but “merely reduces price volatility, and frankly, that benefits farmers, processors and consumers alike.”

The full House Agriculture Committee is expected to write a Farm Bill later this spring, and today’s hearing was part of the effort to consider policy options as part of that process.

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 30 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.

Impact of Measure is Huge Increase in Out of Pocket Costs for Dairy Farmers

ARLINGTON, VA – A proposed amendment to the Senate Agriculture Committee’s farm bill draft would cost dairy farmers more than $400 million in additional expenses, according to the National Milk Producers Federation (NMPF).

The Senate Agriculture Committee postponed consideration today of the 2012 Farm Bill, but when that process resumes, Sen. Michael Bennet (D-CO) is expected to offer an amendment to make dramatic changes to the dairy title of the legislation. Bennet’s amendment would increase the cost to dairy farmers on the margin insurance program “by as much as a staggering $429 million in the next five years,” said Jerry Kozak, President and CEO of NMPF.

“Senator Bennet’s amendment is both bad policy and bad politics,” Kozak said. “It drives up the cost of this program to farmers, and it erodes the careful political and economic balance that the Senate Ag committee has created.”

The dairy portion of the Senate farm bill proposal replaces three existing dairy programs, and uses the budget savings from those to help pay for the Dairy Producer Margin Protection Program. A basic, $4 level of margin insurance is free to farmers, although there are up-front administrative fees tied to the volume of milk insured under the program. If a farmer wishes to insure a larger margin, the premium rates increase with the level of protection.

Under the Bennet amendment, the costs to the dairy farmer – of both the initial administrative fee, and the supplemental premium rates – are greatly increased.

“Senator Bennet’s amendment would raise the overall price tag of the insurance program to farmers. Dairy processors say they agree with the concept of margin insurance, but with this amendment, they’re jacking up the cost of the program to farmers by millions of dollars a year, and once again shifting the risks of the marketplace away from them, onto the backs of our hard-working dairy farmers,” Kozak said.

NMPF has calculated the additional aggregate cost to farmers of the Bennet amendment, based on the average milk production of farms of in six size categories.

Each year of the farm bill, the additional cost paid by dairy producers would be $37 million for $4 of margin protection, and $86 million of $6 margin protection. Over the five-year lifespan of the farm bill, those figures balloon to $186 million, and $429 million.

Yesterday, NMPF wrote a letter to members of the Senate Agriculture Committee to oppose the Bennet amendment, reminding them of “the hard work that senators on both sides of the aisle have put into the completion of this mark. Please don’t allow last-minute amendments such as this to thwart all the effort that has been made to this point.”

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 31 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.

New Approach to Dairy Safety Net Endorsed by AFBF, NCFC

ARLINGTON, VA – A new analysis of the dairy policy changes being considered by the House and Senate Agriculture Committees finds that the reforms will have a minimal effect on milk production and dairy product exports, the National Milk Producers Federation (NMPF) said today.

At the same time, two other national farm groups, the American Farm Bureau Federation (AFBF) and the National Council of Farmer Cooperatives (NCFC), have endorsed the changes in dairy policy that NMPF is pushing for on Capitol Hill. The groups sent a letter today to the Senate in support of the dairy reforms.

The new analysis was prepared by Dr. Scott Brown of the University of Missouri and the Food and Agriculture Policy Research Institute (FAPRI), and was commissioned by the House Agriculture Committee, which is holding a hearing this Thursday on dairy policy. Brown’s report analyzes the Dairy Security Act that the Senate Agriculture committee is also including in the Farm Bill draft it will consider this week. The program features a voluntary margin insurance program to protect against low milk prices or high feed costs, with a basic level of coverage available to all producers for free, and a supplemental, expanded level of coverage available for farmers to purchase. If farmers enroll in the Dairy Producer Margin Protection Program, they will also be subject to the Dairy Market Stabilization Program, which asks them to reduce their milk output when margins are very low.

The key take-away from the FAPRI report is that the dairy reforms reduce margin volatility at the farm level, without negatively affecting the supply of milk to either domestic or international markets, according to NMPF.

“This new assessment should calm any concerns on Capitol Hill that the U.S. dairy industry will be in any way diminished or hobbled by the changes we want to make,” said Jerry Kozak, President and CEO of NMPF. “In fact, by reducing the chances that farmers will lose their equity, these policy reforms will strengthen our industry and make it more competitive in the long term.”

Brown’s study shows that, on average over the period of 2012-2022, there are only small effects on milk availability if the provisions of the Dairy Security Act are in place. Even with 70 percent of the milk supply participating in the program, the analysis shows that supplies average just one tenth of one percent (0.1%) less than the without the program [p. 9].

The impact of the Dairy Market Stabilization program on exports is minimal as well. For example, exports of nonfat dry milk would average just four million pounds lower, or 0.3 percent.

The program’s impact on consumer prices also would be minimal. The Brown analysis shows that during the eleven-year period studied, the national farm-level All-Milk price would average just five cents per hundredweight higher, or less than one-half cent a gallon [p. 10]. Such a small change is not likely to have any impact on retail prices for milk, cheese or other consumer products.

“This report corroborates the research that our own economists have conducted on this program, and demonstrates that margin volatility for farmers is reduced without milk prices being unduly raised. There are only small effects on the milk supply, so dairy product trade impacts are very small. Importantly, neither the margin protection nor the market stabilization programs will operate often, or for long periods of time. They are triggered in when needed, and they trigger back out when they are not,” Kozak said.

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 31 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.

From Jerry Kozak, President and CEO of NMPF

America’s dairy farmers are encouraged that the on-going surveillance and inspections performed by federal authorities continue to ensure that bovine spongiform encephalopathy (BSE), or mad cow disease, does not enter the U.S. food supply.

The U.S. Department of Agriculture (USDA) announced Tuesday that a BSE-infected animal was detected in California, in a dairy cow that was presented at a rendering plant. Three previous cases of BSE have been discovered in the U.S. in the past nine years.

Although details about the age and origins of the animal are being withheld pending further investigation, NMPF offered the following points about the issue:

• Milk and dairy products do not contain or transmit BSE, and animals do not transmit the disease through cattle-to-human contact. The infectious prions that transmit BSE are found in neurological tissues, such as brains and spinal cords.
• The United States put regulations in place in 1997 to prohibit ruminant protein from being used in animal feed. This applies to all cattle, dairy and beef alike.
• Non-ambulatory animals – those that cannot walk – are not allowed to be processed at facilities where meat animals are handled. This regulation helps ensure that animals that are unwell are not entered into the food supply.

For more background on BSE and the dairy sector, visit the NMPF website.

The USDA also has an FAQ on BSE on its website.

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 31 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.

ARLINGTON, VA – The draft farm bill language released this afternoon by the Senate Agriculture Committee includes the key components of the Foundation for the Future dairy policy reform developed by National Milk Producers Federation (NMPF) nearly two years ago. The dairy legislation begins at Section 1401 (page 68) in Title 1 – Subtitle D and goes through Section 1481 (page 111).

In preparation for an Agriculture Committee markup next week, Committee Chairwoman Sen. Debbie Stabenow (D-MI), along with Ranking Member Sen. Pat Roberts (R-KS), released the provisions Friday of the entire farm bill, including the dairy legislative language.

“The primary elements of NMPF’s comprehensive dairy reform package are included in this legislative draft, for which we are grateful,” said Jerry Kozak, President and CEO of NMPF. “The bill reflects the best-possible outcome for America’s dairy farmer community, which is in great need of a better federal safety net than what we have now.” The package of reforms is also supported by many other state and national farm groups.

“We look forward to working with Sens. Stabenow, Roberts, and the other committee members in building support in the Senate for this legislation.”

The Senate farm bill draft contains the major elements of the Dairy Security Act (DSA), introduced last autumn in the House by Reps. Collin Peterson (D-MN) and Mike Simpson (R-ID), and included in Sen. Richard Lugar’s (R-IN) farm bill plan. The core of the DSA is a margin insurance program that protects farmers from dire economic conditions caused by either low milk prices or high feed costs. The margin insurance program replaces existing dairy programs, including the MILC and Dairy Product Price Support programs. Farmers will have the option of signing up for the margin insurance program; if they choose to do so, they will then be enrolled in the Market Stabilization program through which they will be asked to manage their milk output when worst-case conditions appear.

“We believe the approach the Senate Agriculture Committee is taking will generate broad, bipartisan support for the farm bill. This bill allows dairy farmers to better manage their risks, in a deliberate approach that offers a superior safety net, reduces government involvement in our industry, and positions our entire industry to compete in a global marketplace. It saves money compared to existing programs, and will be affordable and convenient for farmers to use. Critically, it treats all farmers equally, and doesn’t produce regional or size-based outcomes that are inherently discriminatory.”

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 31 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.

ARLINGTON, VA – Following the March 29th announcement that the National Milk Producers Federation (NMPF) will assume management of the REAL^® Seal, the Cheese Importers Association of America (CIAA) issued a news release alleging that this change in management of the REAL^® Seal program will violate a law requiring the imposition of fees on imported dairy products.

The CIAA release contains incorrect information and factual errors which necessitate a response from NMPF.

“It appears that the CIAA lacks full knowledge of the history, ownership, and use of the REAL^® Seal program and the concerns voiced by that organization are clearly misplaced,” said Jerry Kozak, President and CEO of NMPF. Kozak said the following points are important to more completely understand the issue:

1. The United Dairy Industry Association (UDIA), a federation of 18 state and regional dairy research promotion boards, owns the REAL^® Seal and is free to license it as the organization deems appropriate. NMPF will now be managing the licensing and marketing of the REAL^® Seal, but ownership of the trademark remains with UDIA. NMPF has long-standing relationships with many of the current users of the Seal, making it a natural fit to carry out the aims of the program.
2. UDIA is a different organization from the National Dairy Board (NDB). When U.S. dairy farmers pay their 15 cents per hundredweight promotion assessment, 10 cents goes to state and regional promotion entities affiliated with UDIA or other qualified programs, and 5 cents goes to the NDB. While the NDB and the UDIA created Dairy Management, Inc. (“DMI”) through which to share staff resources and maximize organizational efficiencies, the UDIA and the NDB remain separate and distinct entities.
3. The 7.5 cents per hundredweight import assessment that is paid by importers for promotion purposes is directed to the national dairy promotion program operated by the NDB. The import assessment is not paid to the UDIA.
4. Legislation that established the dairy import assessment does not impose limitations on how UDIA manages its assets, including the REAL^® Seal. No funds from the NDB have been or will be used for National Milk’s operation of the REAL^® Seal Program.

 

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 31 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 32,000 dairy producers on Capitol Hill and with government agencies.