"Idaho's dairy industry is the third largest in the country and significantly impacts the economy of our state. Unfortunately, our dairy industry has suffered devastating losses in recent years due to escalating feed costs and plummeting milk prices, and federal dairy programs have proven unable to provide farmers with the tools to manage risk and succeed in volatile times. Existing programs are costly and prohibitively complex, and they discourage dairy producers from making decisions that enable them to survive market downturns.
"When the dairy industry collapsed in 2009 low milk prices activated standing federal programs to support dairy farmers. While the government spent more than $1 billion to support the industry through existing dairy programs during this time, including the Milk Income Loss Contract (MILC) Program, the Dairy Product Price Support Program (DPPSP), and the Dairy Export Incentive Program (DEIP), the programs were far from effective at staving off economic disaster. What is more, they have done nothing to provide long-term certainty and stability to the market to prevent a similar collapse in the future. These programs are expensive as well as unproductive: MILC cost taxpayers $776 million in FY09 without providing the safety net needed to prevent a market collapse that year, and DEIP cost taxpayers $20 million in FY10 alone. Existing programs encourage overproduction and take away incentives for dairy producers to manage risk effectively.
"It's long past time to fix these problems and replace these outdated programs with an effective, fiscally responsible dairy program. This is why I have been pleased to work with the Idaho Dairymen's Association and Representative Collin Peterson to introduce H.R. 3062, the Dairy Security Act of 2011. This legislation replaces the current programs with new risk management tools addressing the realities of today's dairy industry, such as rising input costs and a growing export market. In order to provide producers with security to prevent devastating losses when milk prices drop and feed costs are high while giving them flexibility manage risk, H.R. 3062 consist of three main components:
· The Dairy Producer Margin Protection Program, which calculates the producer's margin based on the difference between the average national price of milk and the average feed cost, rather than based on the price of milk alone;
· The Dairy Market Stabilization Program, which discourages overproduction of milk and alerts producers when overproduction of milk may have significant consequences on their overall margins; and
· A streamlined Milk Marketing Orders basic pricing system that changes the way milk used to manufacture cheese is priced from a complicated end-product pricing formula to a more market-oriented competitive pricing system.
"These changes are long overdue, and the new programs are a vast improvement over the current flawed system. I am confident that the Dairy Security Act of 2011 will move the dairy industry to a more market-focused industry while encouraging risk management and requiring less taxpayer assistance, positively impacting Idaho's economy."