Many proposals are presently circulating to fix the problems in the dairy industry. Representative Peter Welch is a co-sponsor of the Dairy Price Stabilization Program Act of 2010 (HR 5288). Senator Bernie Sanders is circulating a draft bill on this issue to introduce in the Senate. The USDA Dairy Industry Advisory Committee recently started holding meetings and is expected to issue a report by the end of the year. The National Milk Producers Federation has a proposal (click here). Dairy Farmers Working Together has a proposal (click here). I recently linked to a proposal by Steve Mandl, a former investment banker turned dairy farmer (click here).
Representative Collin Peterson of Minnesota, chairman of the House Agriculture Committee, has started holding hearings on the 2012 Farm Bill. In a recent interview with the Watertown Daily Times, published on 5/22/10, he said that the 2012 Farm Bill will likely include significant changes in federal dairy policy: Changes in dairy safety net expected. Some aspects of the various proposals listed in the paragraph above are likely to be included in the 2012 Farm Bill.
The problems in the dairy industry are not new, as I have noted before. Many solutions have been tried in the past. What have we learned from those experiences?
The Dairy Policy Analysis Alliance has recently published an excellent discussion of that question. The Alliance is a collaboration between the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri and the Department of Agricultural and Applied Economics at the University of Wisconsin-Madison.
The full document is Dairy Policy Issues for the 2012 Farm Bill (1 MB PDF file, 54 pages). An executive summary is available as a set of shorter briefing papers: Dairy Policy Briefs (1 MB PDF file, 16 pages). If you want an even briefer discussion, see this news release.
For a good understanding of the issues, it is well worth while to read the full document. But the first sentence of the news release summarizes the gist of the report: "Like a lot of strong medicine, past federal dairy programs have cured some industry ills but caused some unpleasant side effects."
Solutions to the problems of the dairy industry that have been tried in the past include: price supports, the MILC program, voluntary supply management, mandatory supply control, revenue insurance, milk marketing orders, and trade policy. Each approach has had unpleasant side effects, which are discussed in the report. And clearly none of those approaches was a successful long term solution, or there wouldn't be the current plethora of proposals to fix "the problem."
Most of the current proposals involve supply management. Voluntary supply management programs that have been tried include the 1984-85 Milk Diversion Program, the 1986-87 Dairy Termination Program (Whole Herd Buyout), and the current CWT program. These haven't proved sufficient, and so most current proposals involve mandatory supply control.
What does the Dairy Policy Issues report say about mandatory supply control? It has never been implemented in the U.S.: "In the past, dairy farmer interest in supply management has dwindled if milk prices improve..." Based on experiences in other countries, the report notes that "the tendency of mandatory supply management programs is to freeze the structure of dairy farms and regional milk production." Also "the first dairy producers to receive quota 'rights to produce' stand to receive a significant windfall gain" and "it may be difficult for new producers to enter dairying." These are all side effects that policy makers and the industry will need to consider.
As anyone involved in the dairy industry knows, the marketing of milk is complicated because of the many policy issues. The Dairy Policy Briefs and Dairy Policy Issues reports described in this post are an excellent resource to help understand these policy issues.
UPDATE: The NMPF board of directors approved their "Foundations for the Future" plan (news release). The IDFA likes the plan except for the supply management part (news release).
