Dairy Policy & Directors’ Leadership Conference April 5, 2011

DIAC Mission Review issues of: Farm milk price volatility Dairy farmer profitability

AMPI Perspective Construct dairy policies that support family farms, not milk volume.

Top Upper Midwest issues Price support and DEIP MILC and Margin Growth management Federal milk market orders

Explore elimination of the dairy product price support program and the dairy export incentive program and use budget savings to enhance the safety net for producers. Price Support and DEIP

Modify Milk Income Loss Contract program and provide a margin insurance option using funds from the elimination of the Dairy Product Price Support Program and DEIP. MILC and Margin

Structure, U.S. Dairy Herds

MILC % of herds% of milk Yearfully coveredeligible %54.9% %40.6% %37.8%

Measuring margin Margin defined as: All Milk Price – Total Feed Cost Per CWT New NMPF- developed feed cost ration includes all cattle (dry cows, hospital cows, replacement heifers, calves)

Margin YearMargin (cwt.) 2008$ $ $ $6.52

MILC vs. Margin Payment Rate YearMILC (cwt.)DPMPP (cwt.) 2002$ $ $ $ $ $ $ $1.15$ $ $.00--

MILC vs. FFF $4 Margin Target

Growth management Adopt a growth management program

Growth Management Plans Reduce milk price volatility Reduce cost of counter-cyclical dairy programs Allow for continued growth Not significantly enhance milk prices

Growth Management What is the farm bill going to cost? CBO scoring Subsidies

Federal milk market orders Review federal milk marketing orders

Why revise FMMOs? End-product pricing formulas, make allowances Class I differentials

DIAC Mission Review issues of: Farm milk price volatility Dairy farmer profitability