Posted: Thursday, May 03, 2012 11:00 AM
State producers say they need more from farm bill due to unique conditions
California producers want dairy programs included in various farm bill proposals to reflect their higher costs and other market conditions unique to the Golden State.
A bill the Senate Ag Committee passed last week would end the Dairy Product Price Support and the Milk Income Loss Contract programs and replace them with margin insurance for producers and a supply-management program.
Insurance to protect margins between milk prices and feed costs appeals to Western United Dairymen's Association, but the organization would like to see the feed calculation changed, CEO Michael Marsh said.
The proposed national feed cost in the calculation for margin insurance would be a national price based on Midwestern feed costs. California costs, however, are higher because feed is shipped in from other regions.
"It's not relative to California and other areas. The feed cost should be based more closely on where cows are fed instead of on where it's grown," he said.
In the last decade, California's real margins were below $4 per hundredweight in 30 months, but the state's dairymen would have received coverage for only eight months using Midwest feed costs, he said.
Western United has taken its concerns to National Milk Producers Federation, the organization that developed the dairy legislation in the Senate and House. It suggested California dairymen purchase supplemental coverage and up their insured margin.
"But that's taking money out of their pocket to get coverage (others) are getting for free," Marsh said.
Western United has developed a proposal that would use an average of feed costs from the 10 states with the highest milk production.
"My board is very interested in margin insurance if we could get it dialed in enough so it actually works. It could be better than what we have," he said.
Western United is also concerned by a potential cap on payments in the margin insurance program. A cap was not included in the bill passed by the Senate Ag Committee, but a cap will surely come up in the House, Marsh said.
"That's not going to perform nearly as well for states with larger herds," he said.
California dairymen also want their production cuts taken into consideration in both the margin insurance and supply management programs. Both use an operation's historic base production in their calculations.
DFA, Land O'Lakes, California Dairy Inc. and Hilmar Cheese have recently put limits on production to match processing capacity.
Dairymen want 100 percent of their historic base taken into consideration and don't want to be penalized because they have reduced their base, Marsh said.