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‘Foundation’ dairy proposal becomes focus of debate

Issue Date: July 20, 2011
By Ching Lee

As dairy farmers across the nation continue to debate how to reform national dairy policy, one proposal has become the focus of much discussion.

Many dairy farmers have heard of Foundation for the Future, a plan that's been widely promoted by the National Milk Producers Federation, which kicked off a 12-city national tour last week—including a stop in Visalia—to meet with producers and other dairy leaders to discuss the program and bolster support.

The plan would change the federal milk pricing system, manage supply, and replace the federal price support program and Milk Income Loss Contract with a margin protection insurance plan.

California dairy farmers say they generally agree that unifying on a single plan will be crucial to passing legislation to overhaul national dairy policy, but some say the jury is still out on Foundation for the Future and whether it would provide an adequate safety net for all producers in the nation.

"I think we're still in a learning process," Domenic Carinalli, a dairy farmer in Sonoma County, said of the plan. "By and large, I think most people in California are still sitting back and waiting to see what happens with Foundation for the Future."

None of the state's dairy organizations has officially endorsed the plan and the California Farm Bureau Federation has not taken a position. Historically, American Farm Bureau Federation policy does not support mandatory supply controls; however, AFBF recently adopted new policy language to say it is willing to consider a temporary supply management system.

California Dairies Inc., the state's largest dairy cooperative, also has refrained from endorsing FFTF, but national dairy cooperatives that have a presence in California, including Dairy Farmers of America and Land O' Lakes, have thrown in their support. Dairy processors generally oppose the plan.

Other dairy groups continue to circulate their own ideas and proposals but so far, FFTF has gone the furthest in the political process. It has the backing of Rep. Collin Peterson, D-Minn., a ranking member of the House Agriculture Committee who last week unveiled a legislative draft very similar to FFTF.

He said he intends to accept comments and suggestions on the draft before introducing an actual bill and that he wants to move a bill through Congress this year, rather than to discuss it as part of the 2012 Farm Bill.

Hank Van Exel, a San Joaquin County dairy farmer, said he strongly supports the concept of FFTF because he thinks the current milk pricing system is broken and needs to change. He said he favors eliminating the MILC program, which compensates producers when domestic milk prices fall below a specified level, and the Dairy Product Price Support Program, which allows the government to purchase dairy products off the market and store them for future sale or use.

"With the government buying the product, I think it has allowed us to overproduce," he said. "There was never a real market for the product. I think it's very important that we get rid of those programs so that we have a market."

Van Exel said he's been a longtime proponent of supply management and likes that component of the FFTF program, which would penalize farmers financially for producing milk above a calculated base.

He noted his involvement with the Holstein Association, which proposed a more specific plan focused on supply management, elements of which are now in FFTF. That plan became the basis for a bill introduced last year by Rep. Jim Costa, D-Fresno, and Sen. Bernie Sanders, I-Vt.; the bill never made it to a vote and has not been reintroduced.

Like Van Exel, Mary Cameron, a Kings County dairy farmer, said she likes the supply management provision of FFTF and ending the government programs. What she said she's "iffy" about is the margin insurance part of FFTF, noting that she doesn't agree with the plan's use of a national average feed cost as part of its calculations to determine producer margin. Producers in the West contend they usually pay substantially more for feed than those in other regions.

Michael Marsh, chief executive officer of Western United Dairymen, which has not taken a position on FFTF, called California producers' concerns about FFTF legitimate and said the National Milk Producers Federation doesn't appear willing at this point to make any changes to its proposal.

"Are Californians actually better off than they were? At this point, we really can't make that conclusion because we'd still like to see this program a little more sensitive to the fact that one size doesn't necessarily fit all," Marsh said. "Some of the demands and concerns and issues we have in California are simply due to feed cost."

Chuck Nicholson, a dairy economist at Cal Poly, San Luis Obispo, completed an analysis last fall of several plans aimed at mitigating dairy price volatility, and said FFTF "could do a lot of what (National Milk Producers Federation) wanted it to do."

First, the program would give producers higher milk prices and markedly reduce price variation, he said. The plan also would tend to increase the average cheese price but lower the price for butter and nonfat dry milk powder. In addition, it would slow the rate of growth in U.S. dairy exports, a concern for California processors and cooperatives in particular because of their dependence on overseas markets.

"It's going to make it a little harder for us to compete in some of those marketplaces where we've been doing fairly well in recent years," Nicholson said.

FFTF would reduce what the federal government currently spends on dairy programs. The Congressional Budget Office confirmed the savings, a key goal for lawmakers as they grapple with the nation's debt and with cuts to government spending.

With so many national issues needing attention and an election next year, Carinalli said he thinks the chance of passing dairy legislation ahead of the 2012 Farm Bill may be "a long shot."

And given the size of the cuts that lawmakers may have to make to some farm bill programs, Marsh said they could end up "fighting over pennies and pushing the whole farm bill debate off into a non-election year like 2013."

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.




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