IDFA: Look at New Study on Dairy Reform

by Jerry Slominski, IDFA
(November 4, 2011) There is a new study out from a pair of dairy economists that dairy producers may want to read.   It was conducted by Charles Nicholson of Cal Poly and Mark Stephenson of the University of Wisconsin-Madison, who did the economic modeling for the original Foundation for the Future plan.   

Nicholson and Stephenson have looked at the latest proposal, introduced in Congress by Rep. Peterson as the Dairy Security Act, and found that it will have some very eye opening results.     

You can find the report by going to the University of Wisconsin website at dairy.wisc.edu.     

The economists say one of their original findings remains consistent: milk price volatility would be substantially reduced under the proposed plan.  But that reduced volatility comes at a price for dairy farmers: significantly lower farm milk prices and lower net farm income across all sizes of dairy farms.  You heard that right, the Foundation for the Future, according to a University of Wisconsin study will result in lower farm net income across all sizes of dairy farms.  

This new look suggests the reforms could lower the U.S. all-milk price by 92 cents per hundred weight and lower cumulative net farm operating income 32 percent to 48 percent. 

According to a press release last week from the Professional Dairy Business Association in Wisconsin, one of the authors also concluded that the proposal would cause small farms to leave the dairy industry at a faster pace than without the program.    

National Milk Producers Federation’s response has been to say that the economic models are not reality.   But, NMPF sure liked the economic modeling conducted by the same  Nicholson and Stephenson when they were selling their Foundation for the Future program a year ago.   That study can still be found on NMPF’s web site.    

In our view, the dairy industry needs more open markets, and less government interference and regulation and better risk management tools for dairy farmers.    

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