Big Changes Could Be Coming to Dairy Industry

Big Changes Could Be Coming to Dairy Industry

There are better ways to utilize federal dollars; margins should replace price in support program.

The Milk Income Loss Contract program could be changed or lost in the writing of the next farm bill.  Jerry Kozak, President and CEO of the National Milk Producers Federation says even though the MILC program has been a popular program, he cautions being very thoughtful about this.

"We believe there is a better way to utilize the federal government dollars, which are going to be limited in the next farm bill, to try to help farmers protect equity," Kozak said. "Last year the MILC payment, thank goodness it was there because it did help some people, I don't think it prevented anybody from going out of business, I don't think it really saved a lot of people's equity. It was a check, but we are looking at what's a much more effective way to utilize those dollars."

A dairy margin protection program could be the MILC replacement. Kozak says that for years the public policy in dairy was related to price, but really it's about margin and he sees a lot of ag lenders interested in what is done with the program.

Previously there was talk of a supply management program. However Kozak says he doesn't look at the program as your classical supply management, he thinks it is more a market management program because it is also predicated on margin.

"In those periods of time when feed costs and price are out of balance this would help stabilize the program," Kozak said. "Last year people think we had a supply problem. I think it was a demand problem because we lost our export arena and therefore we had no way of adjusting. This is more of sending more timely market signals to farmers and it doesn't impact exports and it certainly doesn't promote imports into the program."

The Federal Milk Marketing Order System is another big question in the dairy industry. Many don't understand it and, according to Kozak, that may be good enough reason to take a hard look at it.

"It's a very complex system and we're trying to simplify it," Kozak said. "We know that there are some portions of the federal order system that everyone universally agrees on and that is that the end product pricing formulas haven't really worked. They haven't worked since they were put in effect and we are looking at trying to go to a competitive pay price."

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