National Milk, NFU, Farm Bureau skeptical of dairy supply management

Officials from the National Milk Producers Federation, the National Farmers Union and the American Farm Bureau Federation all expressed skepticism last week about the idea that Congress would address the problems in the dairy industry by establishing a system of dairy supply management under which the government or some other entity would try to estimate the amount of milk in the country and tell farmers how much to produce.

With small dairy farms going out of business while larger farms produce ever more milk even though there is a surplus, the idea of supply management has gained popularity, especially since Canada has defended its supply management system so vigorously in the negotiations to revise the North American Free Trade Agreement.

Dairy processors oppose the idea, saying it could make the supply of milk unstable and that it flies in the face of attempts to grow the industry through exports.

The National Milk Producers Federation, the largest organization of dairy farmers and their co-operatives, has “a lot of constituencies within it,” Alan Bjerga, NMPF senior vice president for communications, told the North American Agricultural Journalists on April 8.

In 2014, he noted, NMPF came up with a plan that some considered limited supply management, but it was met with resistance from the International Dairy Foods Association, which represents companies that make and market dairy products to retailers, and from then-House Speaker John Boehner, R-Ohio.

That year, the farm bill included a Margin Protection Program (MPP) based on the concept of giving farmers a margin between the price of milk and the cost of feed, but many dairy producers ultimately said the payouts were too low and did not sign up for it.

In 2018, Bjerga said, the goal was to “get dairy on the same page, to come up with real assistance to dairy producers.”

The result in the 2018 farm bill is a new, more generous program based on margin protection called the Dairy Margin Coverage (DMC) program. Both NMPF and IDFA supported it.

NMPF’s leaders believe the new program will help dairy farmers, particularly if they sign up for higher levels of coverage, Bjerga said.

“Dairy farmers are not guaranteed a profit, but they are guaranteed a bit of a cushion if times are not catastrophically bad,” he added. NMPF’s current goals are to get farmers to sign up for the program and to convince bankers that help is on the way and that they do not need to plan to auction off farmers’ assets, he added.

But dairy farms are continuing to fail, and there are NMPF members who say the organization should push Congress to establish a supply management system.

NMPF’s goal is “to create tangible policy gains,” and “we can’t go down that road” of supply management, Bjerga said.

But Bjerga acknowledged there “are certainly devotees” of supply management within NMPF. “We welcome the discussion,” he added, explaining that the “window of what is the allowable range of discourse on an issue changes over time. A lot of constituents are putting out an idea that can move that window.”

National Farmers Union President Roger Johnson told the agricultural journalists that the problem in the dairy industry is that when there is a surplus, “we have no tools to incent reduction in production.”

Johnson said that “internally in Farmers Union, the dairy voice is really loud” and that dairy farmers “have been arguing to us we need to get supply management through Congress.”

Johnson said he has told the dairy farmer members “that is not going to happen unless the demand comes from the countryside.” As a result, the Wisconsin Farmers Union is leading a national campaign to create support for dairy supply management.

Johnson noted that there is unity in the dairy industry that plant-based dairy products should not be labeled the same as products that contain milk from animals.

Johnson said he is not sure that labeling “makes a big difference economically over the long haul.” But he said, “We believe we need to be transparent with consumers. You need to be clear to the consumer you are buying dairy milk or something else.”

On trade, Johnson said, “People are deluding themselves if they think trade is going back to what it was. You cannot expect that countries are going to forget when the president of our country spends enormous amounts of time offending leaders all around the world. Those actions are going to have long-term repercussions.”

Meanwhile, the American Farm Bureau Federation’s Market Intel service published a discussion of dairy supply management and an analysis of Farm Bureau’s internal discussions on the issue.

In the analysis, Farm Bureau Chief Economist John Newton noted that “grassroots leaders debated this issue in 2019 and ultimately decided to oppose a mandatory quota system with the willingness to consider a flexible supply management system that is administered through the marketplace and not through the federal government, i.e., milk processors and cooperatives alongside individual dairy farmers.”

Newton also noted that milk supply management programs, which provide incentives or penalties to limit perceived over-production, have been used previously in the U.S. with mixed results. “These programs included a USDA-administered milk diversion program, government-administered and industry-funded herd buyout programs, and base-excess plans, i.e., two-tiered pricing. In addition, a milk supply management program was heavily debated during the 2014 farm bill.”

“While this type of coordination could prove beneficial in the short run, some reflection should be given on the long run, such as considering reforms that would drive further investment and innovation in the U.S. dairy sector as well as expand our market access around the world,” Newton added.

“As a first step, Farm Bureau dairy farmer leaders will convene in 2019 and consider these very issues as they relate to milk pricing reform and, ultimately, the profitability and viability of U.S. dairy farmers,” he concluded.

–Montana Farm Bureau