Analysis: Dairy Supply Management Would Have Triggered In May
University of Wisconsin analysis says milk check deductions could have increased to 4% by July 2012
Published: Aug 3, 2012
A new analysis has found that the dairy supply management provision in the proposed Farm Bill passed by the Senate and House Agriculture Committee would have gone into effect in May 2012 and would still be in effect now using the most recent month for which data is available.
Dr. Brian Gould of the University of Wisconsin's Department of Agriculture and Applied Economics has calculated that the dairy margin was below $6.00 beginning in February 2012 through the most recent month for which data is available, June 2012, based on the dairy provisions in the proposed Farm Bill.
ONGOING DEBATE: Is supply management the way to go? Some groups say no, others yes.According to Dr. Gould, since the Dairy Market Stabilization Program must be implemented by USDA any time the margin falls below $6.00 for two consecutive months, which it did in February and March, the USDA would have announced the program in April requiring dairy producers to either reduce their milk marketings by a minimum of 2% from their base production history or have money deducted from their milk check and sent to the government beginning in May 2012.
Dr. Gould found that the average margin was below $5.00 for the months of March and April, which would increase the required DMSP deductions beginning June 1st to a minimum of 3% of a dairy producer's base production history. The DMSP production penalties would have continued to increase as the average margin was below $4.00 for the months of April and May, which would have led to another reduction beginning July 1st to a minimum of 4% of a dairy producer's base production history.
The "Supply Management" program has received both praise and criticism from the dairy industry. International Dairy Foods Association supports the amendment, while the National Council of Farmer Cooperatives and the National Milk Producers Federation stand against it.
The House Agriculture Committee defeated the Goodlatte-Scott amendment July 11, but it is expected to be considered again on the House floor, if the FARRM bill reaches consideration.
The Wisconsin Dairy Business Association reports that both the House and Senate versions of the Dairy Market Stabilization Program require a $250 annual fee per 100 cow farm. The Goodlatte-Scott amendment eliminates those fees and changes producers' base and calculation method every calendar year. DBA also says the cost to the producer for margin insurance is lower under the Goodlatte-Scott amendment for nearly all levels of coverage compared to the Senate and House proposals with supply management.
Laurie Fischer, Executive Director of the Wisconsin Dairy Business Association, said her organization opposes the supply management program.
"We find it unacceptable that dairy farmers are being forced to participate in a supply management program in order to receive margin insurance," she said.
She urged dairy producers to join in supporting the "bipartisan, common sense solution in the Goodlatte-Scott proposal."
For more information on Dr. Gould's work, click here.
Other groups have also said the drought would have an effect on the supply management program. Click here to read the story.
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