July 23, 2012
Supply Management Would Have Already Reduced Milk Supplies Soon To Be Further Reduced By Drought Conditions
Government-Mandated Reductions to Farmers’ Incomes Would Have Started in May
(Washington, D.C. – July 23, 2012) A proposal in the new Farm Bill headed to the House floor would have been limiting U.S. milk production since May, if it had been in effect, even as agriculture economists and the U.S. Department of Agriculture are warning that the drought throughout the country will reduce milk supply and raise consumer prices.
According to calculations set out in the bill using current USDA data, the proposed "Dairy Market Stabilization Program" (DMSP) would have been in effect starting in May and would likely still be in effect today. This new government program would force milk companies to short payments to dairy producers and send the difference to the government. Producers would be subjected to the penalty until they reduced milk production.
The new program would allow the government to manipulate farm milk prices when producers’ profits falter, effectively reducing the milk supply until milk prices increase. Dairy farmers enrolled in the program would have had their revenue reduced from 2 percent to 6 percent in May and possibly by 3 percent to 7 percent in June of this year. As a result of the lost revenue, farmers would be expected to reduce their milk production, most likely by reducing herd size.
The Farm Bill also calls for a new subsidized revenue insurance program that would simultaneously provide payments to dairy farmers to partially or totally offset the revenues lost through the stabilization program. Both programs have been included in the Farm Bill that passed the Senate in June and was endorsed by the House Committee on Agriculture earlier this month.
“Not only will consumers be facing higher prices in the near future, because cows produce less milk during high heat conditions, and the cost of feed will be higher, but this new program would have already dug the hole deeper,” said Connie Tipton, president and CEO, International Dairy Foods Association.
“This is an excellent example of why it doesn’t make any sense for Congress to attempt to manage the supply of milk," said Jerry Slominski, senior vice president, International Dairy Foods Association. “The weather changes faster than government can change its rules and regulations, and this will cause prices to swing more wildly once the impacts of the drought are felt by the industry.”
The House Committee on Agriculture considered striking the new government milk supply management program, but an amendment offered by Congressman Bob Goodlatte of Viriginia and Congressman David Scott of Georgia was defeated. Speaker of the House John Boehner recently stated that our dairy programs are “Soviet-style” and that one of the proposals in the bill “makes it worse.”
# # #
The International Dairy Foods Association (IDFA), headquartered in Washington, D.C., represents the nation's dairy manufacturing and marketing industries and their suppliers, with a membership of 550 companies representing a $110-billion a year industry. IDFA is composed of three constituent organizations: the Milk Industry Foundation (MIF), the National Cheese Institute (NCI) and the International Ice Cream Association (IICA). IDFA's 220 dairy processing members run more than 600 plant operations, and range from large multi-national organizations to single-plant companies. Together they represent more than 85% of the milk, cultured products, cheese and frozen desserts produced and marketed in the United States.