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Archive for the ‘Perspective’ Category

By Ryan Dennis

The Federal Milk Marketing Improvement Act, also known as S1645 and the Specter-Casey Bill, expired on the floor of the U.S. Senate on the last days of 2010.  Introduced by Pennsylvania Democrat Arlen Specter and read twice on August 6th, 2009, the dairy proposal has run its allotment of two years after having been referred to the Committee of Agriculture, Nutrition and Forestry.

Bill S1645 needs to be reintroduced to Congress to remain a viable dairy reform proposal.

Its supporters are anxiously waiting for it to be reintroduced.

Bill S1645 hoped to “ amend the Agricultural Adjustment Act to require the Secretary of Agriculture to determine the price of all milk used for manufactured purposes, which shall be classified as Class II milk, by using the national average cost of production, and for other purposes” (Support Bill S1645 Federal Milk Marketing Act).  Of the propositions currently discussed and debated upon by the dairy community in the United States, The Federal Milk Marketing Improvement Act offered the most direct positive influence on farmgate prices received by farmers.  By guaranteeing a healthy Class II price (in a four class system) that is a function of the farmer’s cost of production, the plan sought to stabilise often-volatile returns and ensure producers receive a profit regardless of market and outside conditions.  Pennsylvania farmers stood by their senator’s bill, most of whom run small or mid-size operations.

If press in agricultural journals is any indication of public opinion, the “Foundation of the Future” plan presently appears be a frontrunner in dairy politics, fuelled by efforts and funding of its founder, the National Milk Producer’s Federation.  Foundation for the Future involves an insurance scheme in which all farmers would receive a very basic guarantee against significantly low prices, with the opportunity to purchase additional protection.  Those opposing Foundation of the Future fear that it will only favour the larger farms who have the means to purchase the extra insurance, and that it does little to alleviate the conditions that create loss margins.  Holstein Association USA has also created a proposal that seeks to slow herd expansion in the US with a quota system.

By Ryan Dennis

As Europe continues to shift from the concept of “Multi-functionality”-based payments towards a deregulated free market system, Irish dairy farmers are weighing their potential to increased their herd size- a move they may be forced to make to remain in business.

Irish dairy farmers will be expected to expand, despite high land costs.

As the milk quotas gradually ease, some are meeting the new phase for Irish agriculture with optimism, despite tight margins predicted for other farmers in free markets around the world.  Michael Murphy, a dairy farmer from Cork, estimates that the island has the means to increase the national herd size by 400% and create over 45,000 new jobs.  Following the model of the New Zealand’s South Island, the grazing-based system that Irish agriculture is based on can help them utilize a low cost model of producing milk than many other countries in the EU cannot.

Expanding production in Ireland, however, comes with significant challenges, and at a significantly challenging time.  While infrastructure costs may be lower per cow than many other EU nations, opportunity costs are not- particularly the price of land.  The limiting factor in increasing an Irish herd will likely be finding the extra pastures to graze them on, which tends to come at premium cost on the island.  Many farmers will not have the funds or borrowing potential to do so, as the county faces severe economic woes across all sectors.  Even in times of promising economy, obtaining additional paddocks may be an obstacle for the Irish farmer, already existing on tight margins.

In order to survive, the Irish dairy farmer will have to do something that many small farmers in other market-based milk communities had to do: get big or get out.  When Australia became a deregulated market in 2000, some regions lost as much as 60% of their dairy farms in two years.  Last year, 92% of dairy farms that went out of business in the United States had less than 100 cows.  The face of agriculture in Ireland will be changing, forcing many Irish farms to expand and bringing small dairy farms new challenges.


By Ryan Dennis

Perhaps the severity of the 2009 dairy crisis can be measured by the passion and diversity of dairy reform proposals being weighed among producers in the United States.  Last year, Holstein Association USA introduced a proposition to reduce the volatility of the dairy industry that revolved around supply management- a practice common in the EU but previously denounced as “un-American.” Today, the Dairy Price Stabilization Program (DPSP) is one of three major ideas being considered.  In May, Congressman Jim Costa (D-Fresno) garnered the support of fellow house members Peter Welch (D-VT), Joe Courtney (D-CT), Rick Larsen (D-WA), and John B. Larson (D-CT) to introduce the legislation.  “While periods of boom and bust are not new to the dairy industry, our dairy families cannot afford another year of low milk checks that don’t even cover the cost of production,” said Costa. “The dairy price crisis is devastating our local economy and ability to create and sustain jobs. This bill will help the dairy industry get back on track and curb the milk price volatility that is driving dairy farmers in the Valley and our nation out of business.”

The DPSP is being represented by Congressman Jim Costa

The objective of the DPSP is to maintain a more uniform all-milk price by trying to encourage a balanced supply and demand of milk produced in the United States.  Farmers’ three previous years of production would be averaged to find a milk marketing base.  Those who produce more than that average in a given year would be fined a “market access fee” on all milk that is in excess of the figure, unless the nation’s demand for milk has not been met.  Market access fees would be collected by milk plants or cooperatives and redirected to all dairy producers who have not exceeded their personal quota.  Each producer’s allotment is determined by a rolling average, so all milk that is penalized will raise the producer’s average for next year.  The Secretary of Agriculture will determine production needs for the country by forecasting imports, exports and demand, and may increase each producer allocation accordingly.  The aim of the DPSP, in simple terms, is to slow expansion.

Time, debate, and the political environment will determine where the Dairy Price Stabilization Program will fall among the other two counterpart plans.  It promises to complement, not abolish other price supports, such as the Milk Income Loss Contract (MILC).  Many see this as a significant advantage over National Milk Producers Federation’s (NMPF) margin protection scheme, for which the NMPF insist they much forfeit the MILC in order for it to be passed.  While the DPSP hopes to encourage fair prices to dairy farmers, some feel that it cannot guarantee it as well as the Federal Milk Marketing Improvement Act (also known as the Specter-Casey Bill and S1645), in which the Secretary of Agriculture determines the Class II price himself.  James Maroney, a Vermont dairy farmer, fears that the DPSP will not be beneficial to producers in his state.  “ If the Dairy Price Stabilization Act fixes the price above where it is now, it will drive supply, and in order to shrink supply, it must therefore fix the stable price below where it is now…That would put the price permanently below the median cost of production for 700, or 70 percent of Vermont’s conventional farms. As these farms go out, large farm operations would continue to expand, driving the price down, putting all the remaining Vermont farms, whose ability to expand is proscribed by geography and social regulations, out of business, too.”

Further explanation of the Dairy Price Stabilization Program can be found here: http://www.holsteinusa.com/association/dpsp.html



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