Changes in the Foundation for the Future (FFTF) initiative as shown in The Dairy Security Act of 2011 (HR 3062the Peterson-Simpson bill) represent another positive step toward significant and long-overdue dairy policy reform. The changes address major concerns expressed by those skeptical of FFTF for whatever reasons.
Several groups and many individuals were put off by mandatory participation in the market stabilization (production reduction) program, intermittent and short term as the cutbacks in milk payments are expected to be. Now anyone can produce as much milk as they want without penalty. However, under the bill in Congress, only those willing to take part in the market stabilization program will be able to benefit from the margin protection program. This gives people and organizations a choice and helps, but does not eliminate, the free rider problem that plagued Cooperatives Working Together.
Now, the margin protection base plan covers 80 percent of production, up from 75. New is a so-called growth coverage option that enables a producer to protect margins on additional milk at a fixed premium for a fixed amount of milk. The disincentive is that premiums would go on even though production drops. New, also, are modest fees to help offset the cost of the margin program. Under the current bill, all market stabilization monies collected would go to purchase dairy products.
There has been a change in the combination of low margins and relative U.S. dairy product prices that trigger suspension of the market stabilization program. The change offers more protection against imported dairy products and interferes less with exports.
The only federal order reform directives in the bill now are that competitive pricing be used for determining Class III milk prices, an expedited hearing process is used solely for this change, and that reform provisions require a majority vote of producers.
Those people advocating that the MILC program continue may not understand that existing law substantially erodes future payments. Changes in the payment rate, feed adjuster, and per-farm cap all would reduce payment levels.
As with any policy reform, there will be winners and losers. But dairy leaders, policy makers, legislators, and editorial writers, for that matter, must take the course that does the most good for the most people in our industry. Supporting HR 3062 and similar Senate legislation is a course in the best interest of our industry.