CEO of the National Milk Producers Association Jim Mulhern last week told dairy producers that had Congress passed the 2012 Farm Bill and its Dairy Security Act last year, they could be getting $1 more per hundredweight of milk right now.
Mulhern said a farmer with 200 cows, who purchased margin coverage at a level of $6.50 per hundredweight, would have received more than $44,000 in additional payments in 2012 under the Dairy Security Act that is now pending before Congress.
The DSA includes margin insurance and a program that uses milk payments to communicate market conditions to farmers.
"The DSA was designed for the type of conditions we experienced last year: high feed costs and weak farm milk prices. If DSA had been in effect, dairy farmers who chose to participate in the program would have received margin insurance payments to cover increased costs and would have had to make only small reductions in milk output under DSA's market stabilization program," Mulhern said.
Yet, opponents of the program have dubbed it "supply management," and say consumers will suffer from higher prices while U.S. dairy supplies become unreliable for the world market.
The International Dairy Foods Association, an opponent of the plan, said last summer the program could hurt global competition and be confusing to operate.
But NMPF's Mulhern countered the claims in his comments to Wisconsin and Minnesota producers, noting a margin-only insurance program, which was offered as another option from milk processors, is "irresponsible" and would "create price-depressing milk surpluses and potentially cost billions of dollars."
"It would be terrible for our industry to enact a margin insurance-only program that guaranteed processors access to cheap milk by encouraging excess milk production," Mulhern added. He said that an insurance only plan would keep market signals from getting through to producers.
Realistic insurance rates under a margin-only program, Mulhern said, would have to be much higher than those proposed in the Dairy Security Act in order to cover a greater portion of the cost of such a program.
"We are able to keep the insurance rates affordable under the DSA because the market stabilization program will help keep supply and demand in better balance," he said. "Without stabilization, a margin-only program could become prohibitively expensive for small- and medium-sized producers to participate. That would be damaging here in the Midwest, and throughout the country."
As Congress prepares for markup on a new Farm Bill, NMPF continues the push to include the DSA in negotiations.
"I believe Congress will pass a farm bill this year, and when all the dust settles, DSA will be the dairy program in the final bill," Mulhern said.