October 18, 2013 — A proposal by two University of Ohio dairy economists John Newton and Cam Thraen called “MILC and Honey,” is getting some attention. They say it’s a “retooled dairy farm
safety net that works for small and large-scale dairy farm managers, is fiscally responsible, does not mute market supply and demand signals, and does not require a market stabilization program.”
The plan allows dairy producers an option to choose annually between Milk Income Loss Contract (MILC) program participation or a stand-alone margin insurance program as their elected safety net.
The University of Minnesota’s Dr. Marin Bozic said in Friday’s DairyLine that the proposal “gives dairy producers a genuine choice.” Dairy producers that grow most of their feed can continue to use the MILC program to protect milk revenue and those that have feed risk exposure can choose the new margin insurance.
Second, the program is more conservative and limits margin coverge to $6.50 per hundredweight, a level Bozic says “will work very well as a safety net against deep losses, but does not cover shallow losses as some risk is needed for dairy markets to function properly.”
“The Ohio proposal certainly reduces the need for the stabilization program,” Bozic said, “But I do not think it will end all debates. Proponents of the Dairy Security Act will continue to argue that we need incentives to accelerate margin recovery when margins are low. What I would say is that if you had to drop the stablization program for political reasons, the Ohio proposal is the most meaningful alternative to the Dairy Security Act I have seen to date.”
When asked if the program is a “Jonny come lately,” Bozic answered, “No, the MILC was a Johny-come-lately, and now it is the foundation of our dairy policy.” While Bozic is convinced the proposal has strong merit, he stopped short of endorsing the plan, concluding, “We should consider the Ohio proposal seriously.”