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Dairy Facts 2016

New Study Questions Dairy Farmers’ Need for Supply Controls

Jul 31, 2013

A recent study by the Illinois Farm Bureau Farm Management Association and the Department of Agricultural and Consumer Economics at the University of Illinois shows that dairy farm income is the least volatile when compared to grain, hog or beef farms.   According to Bob Yonkers, IDFA chief economist, the study bolsters IDFA’s argument that margin insurance is a valuable policy tool that will help dairy farmers deal with price and income volatility.

None of the other farm types in the study, all of which were found to have greater income volatility than dairy farms, have a government program to control the supply of those commodities to the market. 

“Supporters of the Dairy Security Act, which includes the supply management scheme that was resoundingly rejected by  the House of Representatives, have repeatedly claimed that dairy producers need protection from price and, thus, income volatility,” said Yonkers. “Yet, this new study shows that dairy farm income is actually less volatile than other farms. An effective margin insurance program, as offered by the Goodlatte-Scott amendment now in the House Farm Bill, provides protection against income volatility.  Why does dairy need supply management when other more volatile commodities do not?”  

The recent study by Scott Brown, assistant research professor at the University of Missouri, is frequently cited by proponents as a reason to oppose the Goodlatte-Scott amendment, which offers all of the dairy policy reform proposals in the Dairy Security Act except the supply management proposal. A closer look at the survey shows that:

  • The Dairy Security Act would significantly increase milk price volatility when compared to Goodlatte-Scott, which has no impact on milk price volatility;
  • The Dairy Security Act would cost Americans, as consumers and taxpayers, more than Goodlatte-Scott would;
  • The Dairy Security Act would decrease dairy exports, and thus costs jobs, while the Goodlatte-Scott approach would do neither.

“All the Dairy Security Act’s supply management scheme would do is increase the milk price volatility in the marketplace for everyone else in the supply chain who does not have a government program to help them deal with marketplace volatility,” concluded Yonkers.

Read "Stability of Farm Income" here.

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