From The MPC Newsletter
H.R. 5288, the "Dairy Price Stabilization Act of 2010,"
Has Been Introduced in the House of Representatives!
This past week, Representative Jim Costa (Fresno) and four of his colleagues in the House of Representatives introduced H.R. 5288, the Dairy Price Stabilization Act of 2010. In short, the legislation would create a tangible financial incentive for all U.S. dairy farmers to better manage their growth in milk production. Also co-sponsoring the bill are Reps. Peter Welch (Vermont), Rick Larsen (Washington), Joe Courtney (Connecticut) and John Larson (Connecticut). The text of the bill and summaries can be found at www.stabledairies.com.
H.R. 5288 is the product of several years of work in developing a production management program that allows our nation’s producers to continue growing to meet our increasing demand for dairy products, while at the same time creating a financial incentive that will help ensure that not all 65,000 producers expand their production at the same time, collapsing the value of milk and dairy products every few years, as our producers have become painfully familiar with.
The bill utilizes industry analysis that’s been done over the past three years regarding the root causes of milk price (and farmer profit margin) volatility, which has continued to grow and become more violent with each “boom” and “bust.” Multiple economic forums have been held over the past couple years to look at milk price volatility, and additional work has been done by Dr. Mark Stephenson (Cornell University) and Dr. Chuck Nicholson (Cal Poly University, San Luis Obispo) on the specific issue of finding the driver for this increased volatility. Those efforts have revealed that much of the volatility in the value of raw milk can be attributed to cyclical patterns, some of which result from government policies that mute direct market signals to individual dairy farmers. The goal of the H.R. 5288 is to create a direct economic signal to the dairies that will help individual farmers make more informed decisions when deciding on future growth of their individual milk production.
As a recap for anyone who isn’t familiar with the details of the Dairy Price Stabilization Act, here are the top five things you need to know about H.R. 5288:
So as you can see, H.R. 5288 is straight-forward and simple. It creates a tangible incentive that dairies would consider when planning their expansions in milk production. The bill, as structured, would not serve as a significant barrier for any dairy wishing to start operation or expand production. Rather, the bill is aimed at giving the remaining dairies – those that are not in “expansion mode” – a tangible incentive to maintain their year-over-year production within the three percent annual growth outlined in the bill.
Contrary to what is being said and written by some critics about the Dairy Price Stabilization Act, the program actually puts our industry in a much better position to grow in the long-term and meet an increasing demand for our products. Not only is the industry in a position to be a strong competitor in the world market, but this industry is also primed to delve into additional domestic markets. Dairy product processors are constantly finding additional ways to fractionalize milk and find additional domestic and international markets outside the traditional bottled, butter, powder and cheese markets. However, the violent boom/bust nature of the milk price makes it difficult-to-impossible to maximize these markets. H.R. 5288 can reduce those extreme booms and busts and allow our industry to maximize the domestic and international demand for American dairy products.
One of the most common questions that comes up when discussing the DPSA is how the bill would impact our ability to continue exporting dairy products, as well as minimize the products that are imported into the U.S. While the authors of the DPSA believe the program would not prevent us from participating in global markets and competing with products that other nations want to import into the U.S, they felt it was important to include a “safety valve” that gave producers an opportunity to review the success of the DPSA after three years of operation before continuing the program further. If the data clearly shows that the program is not working as intended, either because volatility has not be reduced or because our import/export balance has been greatly impacted, producers will be able to eliminate the program, and the industry can re-evaluate the best long-term policy. This is an important distinction between the Dairy Price Stabilization Act and some of the other alternatives being floated around the industry. Some are proposing that the industry eliminate basic producer safety nets as part of their long-term plan. The authors of H.R. 5288 chose not to include that drastic measure, as a step like that truly takes the U.S. dairy industry down a path of no return.
More explanation on the “triggers” in the DPSA
In the bullets above, a set of triggers are mentioned as the drivers used to determine the allowable year-over-year growth and market access fees. The table below outlines those triggers. Existing dairies that are planning to expand would choose either the “new-milk” or “all-milk” market access fee, whichever is cheaper for their specific planned expansion. New dairies facilities would pay the “all-milk” market access fee, as this would be the cheapest option for them.
NOW IS THE TIME TO EDUCATE YOURSELVES AND RALLY BEHIND THIS PROPOSAL! For three years, Milk Producers Council and other supporters of this concept have traveled the country promoting the program. With very few exceptions, our groups found broad support amongst producers for the concept behind the DPSA. With the introduction of H.R. 5288 into the House of Representatives this week, we know have the ability to evaluate the details of the DPSA, and I urge all of you to take advantage of that. You can find all the current information on H.R. 5288 at: www.stabledairies.com. Spend a few minutes and check out the website, which includes the text of H.R. 5288 as well as summaries and frequently asked questions.
In the next few issues of this newsletter, we’ll be looking closer at some of the details of the DPSA, so stay tuned. If you have any questions, please don’t hesitate to contact MPC at (909) 628-6018 or shoot me an email at email@example.com.
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