A number of proposals are being discussed around the country and on Capitol Hill to change how milk is priced to farmers in this country. One proposal that is being supported by California’s Milk Producers Council and several other producer groups around the country is called the Dairy Price Stabilization Program (DPSP). We talked about it with California dairy producer, Geoffrey Vanden Heuvel in Wednesday’s DairyLine.
Vanden Heuvel began by pointing out that growth and demand for dairy products in the U.S. is very stable, averaging about 1-2 percent per year, in accordance with the population growth.
The problem, he said, is that, when milk prices are profitable, dairy farmers want to produce more milk, about 3-4 percent more milk, “that’s the incentive, that’s the result.” That, he said, is not sustainable if demand is only up 1-2 percent and “is why we have crashes and we have gotten into a boom and bust.”
The DPSP allocates market share, according to Vanden Heuvel, and if a farmer wants to grow beyond that 1-2 percent, he would pay a modest market access fee. That fee would go into a fund and all of that money would be distributed to the producers who did not increase their milk output above the 1-2 percent.
He called it a “simple dollar in, dollar out agreement amongst us as producers so that all of us don’t try to increase at the same time, which is unsustainable.” He added that the DPSP is unlike the Canadian base quota system which “has a rigid fixed base that has accumulated tremendous a lot of value because it’s transferable. “
Those elements are not part of the DPSP, he said, and “the plan has been designed to not accrue a lot of value in base and would not be a barrier to new entrants.” For more information, log on to www.stabledairies.com.