In mid-May 2013, both the Senate and House Agricultural Committees passed preliminary versions of the FARRM Act, commonly referred to as the farm bill. Both the Senate and House versions of the farm bill contained the Dairy Security Act (DSA) and rejected the Dairy Freedom Act (DFA) commonly referred to as the Goodlate and Scott Dairy Amendment.
However, the fight over future farm bill dairy policy has not ended as supporters of the Goodlatte and Scott Amendment have the support of a rather broad coalition of over 150 organizations including food manufacturers, grocers, retailers, restaurants, dairy processors and even several key dairy farmer organizations.
These organizations, along with many congressional representatives, promise to fight for the amendment when the farm bill comes up for debate before the entire House of Representatives in June 2013.
What is at stake? The DSA traces its roots back to the Foundation for the Future program originally developed by the National Milk Producers Federation. The DSA would eliminate several aspects of current dairy policy including the Dairy Product Price Support Program (DPPSP), the Milk Income Loss Contract (MILC) and the Dairy Export Incentive Program (DEIP). These programs would be replaced with a voluntary margin protection program that would use an insurance type mechanism to pay indemnities to dairy producers when income-over-feed-costs (IOFC) falls below certain trigger levels.
This aspect of DSA is called the Dairy Producer Margin Protection Plan (DPMPP) and would pay producers the difference between the national average dairy farm milk price (All-milk price) and the national average cost of feeding dairy cows based on corn, soybean meal and alfalfa hay prices. Participation in the DPMPP aspect of DSA would be voluntary.
However, dairy producers opting to participate in DPMPP would be required to also participate in the most controversial aspect of DSA the Dairy Market Stabilization Program (DMSP). Participation in DMSP would require dairy producers to pay an annual administrative fee ($100 to $2,500 depending on total annual milk production) and scale back milk production when specific IOFC trigger points are reached. In DMSP as IOFC falls below $6 per hundredweight participating dairy producers are limited in the amount of milk they can market. The limits on milk marketing increase as IOFC declines.
To view the details of the DMSP please refer to the Congressional Research Service publication Dairy Proposals in the 2012 Farm Bill.
Written by: Craig Thomas, Michigan State University Extension