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Economic review of reform plans discussed

PD Editor Walt Cooley Published on 05 October 2010

To assist the dairy industry in selecting the right policy reform, three dairy policy experts analyzed three main legislative proposals brought forth in the past year. They announced their findings at the 2010 World Dairy Expo just after presenting them to the U.S. Secretary of Agriculture’s Dairy Industry Advisory Committee in Washington, D.C.

While not promoting any one plan over the other, Mark Stephenson, director of dairy policy analysis, University of Wisconsin – Madison; Chuck Nicholson, department of agribusiness, Cal Poly – San Luis Obispo; and Scott Brown, associate director, Food and Agriculture Policy Research Institute (FAPRI), University of Missouri – Columbia, displayed their assessments in an objective manner to allow people in the industry to draw their own conclusions.

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The researchers addressed the likely effectiveness and possible unintended consequences of the Costa-Sanders bill (H.R. 5288 and S. 3531), the Marginal Milk Pricing (MMP) program proposed by Agri-Mark and the Foundation for the Future (FFTF) program proposed by National Milk Producers Federation (NMPF).

The analysis compared the outcomes of each program to a baseline scenario (which assumes continuation of current policies and no new programs) for the period of 2010 through 2018.

Nicholson stated that all three programs could reduce variability in the all-milk price and would reduce government expenditures as compared to keeping status quo. Yet each of them impact the all-milk price, Class III price and total product sales differently.

Assuming these policies are enacted with the 2012 Farm Bill, during the period of 2013 to 2019, the Costa-Sanders Bill would yield 69 cents less per hundredweight than the baseline average all-milk price of $15.32. MMP and FFTF would both yield higher than the baseline at 23 cents and 17 cents more per hundredweight, respectively.

MMP and FFTF have an even higher impact on the Class III average price, with anticipated changes of 48 cents (MMP) and 71 cents (FFTF) greater than the baseline price of $13.43 per hundredweight. The Costa-Sanders bill would be 44 cents less than the baseline.

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Based on these pricing models, the three programs would only alter fluid milk sales by 100 to 200 million pounds from the baseline average of 60.4 billion pounds.

As the government expenditures with the baseline program continuously rose to nearly $3 billion by 2019, the Costa-Sanders and MMP programs managed to maintain the expenses at roughly $1 billion. Meanwhile, FFTF actually penciled out to have little or no need for government support based on the assumed value of premiums collected.

The full analysis report is available at http://dairy.wisc.edu PD

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