Take a moment to read the recent CEO comment by National Milk Producers Federation (NMPF) Jerry Kozak. It contains important information about the future of the dairy product price support program (DPPSP). Read the full column here.
In the 12 years I’ve been CEO of NMPF, we have vigorously defended the function and importance of the price support program. It’s been as essential a focus for NMPF as any other single policy item. In the 2008 Farm Bill, we actually worked to make improvements in it, shifting the focus away from supporting a milk price, and toward supporting key commodity prices.
But at the end of the day, this question remains: is the dairy product price support program the best use of federal resources to establish a safety net to help farmers cope with periods of low prices? Is it effective? I believe, the answer today on both counts, is no. Here are the major reasons why:
1. It reduces total demand for U.S. dairy products and dampens our ability to export, while encouraging more foreign imports into the U.S.
2. It acts as a disincentive to product innovation.
3. It supports dairy farmers all around the world and disadvantages U.S. dairy farmers.
4. It isn’t effectively managed to fulfill its objectives.
5. The price levels it seeks to achieve aren’t relevant to farmers in 2010.
For all of these reasons, what NMPF is now focused upon is a transitional process that shifts the resources previously invested in the dairy product price support program, to the income protection program that I have discussed previously.
In summary, discontinuing the DPPSP would eventually result in higher milk prices for U.S. dairy farmers. By focusing on indemnifying against poor margins, rather than on a milk price target that is clearly inadequate, we can create a more relevant safety net that allows for quicker price adjustments, reduced imports and greater exports. As a result of our DPPSP, the U.S. has become the world’s balancing plant. As time marches on, so, too, must our approach to helping farmers.