1. Minnesota-Wisconsin Dairy Policy Conference Eau Claire, WI April 3, 2012 Steve Etka Midwest Dairy Coalition Perspectives and Progress on 2012 Farm Bill Reauthorization

2. Role of Midwest Dairy Coalition Since creation in 1990, role of the Midwest Dairy Coalition has been to advocate for the unique perspective of Upper Midwest Dairy, and particularly dairy farmers, in Washington DC. Coalition’s membership includes nearly 11,000 dairy farms, roughly 20% of nation’s dairy farms. 56% of all WI dairy farms, and 65% of all MN dairy farms.

3. What makes the “Upper Midwest” Dairy Perspective So Unique?  Predominantly focused on manufactured dairy products. Over 90 percent of the milk we produce in the UMW goes in the cheese, butter and powder.  Policies that degrade the value of manufacturing milk hurt our farmers and our manufacturers.

4. Dairy Policy Must Address Needs of Majority of UMW Dairy Farmers Consistently, Midwest Dairy Coalition has underscored the point that for dairy policy to make sense, it must address the needs of the family dairy farmers. Nationally, and even within the Upper Midwest, dairy farms come in all shapes and sizes.

5. Policy Should Focus on Needs of Farmers, Not Volume of Production Must respect needs of all scales of operations. But we also must not lose sight of the fact that about 88% of all dairy farms in the nation milk 200 cows or fewer. 3% of dairy farms have herds over 1000 cows, but produce 50% of the nation’s milk. Need to Focus on Farmers First, and Volume Second

7. What’s Going on With Current Farm Bill? So that brings us to the current Farm Bill debate Current Farm Bill expires at the end of September of this year Late last year, there was a trial run at doing a Farm Bill, as part of the ill-fated deficit reduction “Super Committee” process

8. Super Committee Process was a “Trial Run” at the Farm Bill Even though the “Super Committee” process fell apart last year, the Farm Bill package is reported to have included a fully negotiated dairy package, which has still not been made public. The Peterson bill, based on the National Milk Producers Federation “Foundation for the Future” plan, has been the starting point of the dairy negotiations.

9. Peterson Bill Good Starting Point… Some good aspects to the NMPF/ Peterson plan The dairy reforms proposed are in reaction to the extremely low margins for dairy farmers in 2009. Widespread view that existing dairy safety net programs (price support and MILC) were not sufficient to deal with severity of 2009 situation.

10. … But Changes Needed to Address Our Farmers’ Concerns Midwest Dairy Coalition members had a number of concerns about Peterson bill: – Federal Order Reform Provisions Expanded Current Bias Against Manufacturing Milk –Safety Net was not sufficient to Address Needs of Most Midwest Dairy produce Held two Member fly-ins to DC (2010 and 2011) to urge changes to bill to address concerns

11. MILC Has Been Important Safety Net for Upper Midwest Without the MILC program, 2009 would have been far worse. Provided nearly $800 million in assistance in FY 2009 alone nationwide. And for WI alone, MILC has provided $670 million in assistance to our dairy farmers since its inception in 2002.

13. The Peterson bill would eliminate: – price support and MILC programs, Replace with Margin Protection Program –focus on margin between milk price and feed costs. –Requires participating farmers to also agree to growth management provisions when margins fall below $6

15. Unlike MILC, new program requires producers to pay premiums to get sufficient coverage. –Stephenson analysis shows that over 2-year period (2011-12), would not make sense for farmers to participate unless they bought up to $6.50 margin coverage level. This is a significant shift in the concept of a dairy safety net. Will take time for folks to adjust to new approach.

16. MDC Proposed Lower Premiums to Encourage Producers to Buy Up Midwest Dairy Coalition has argued for lower premiums for the first 4 million pounds of production Would be more affordable for all farmers to buy adequate coverage, but particularly for small and medium scale dairy farms, transitioning from MILC. The 2-tier premium concept has strong support from UMW and NE delegations

17. Dairy Package Includes Changes Requested by MDC Congressman Peterson and Senator Stabenow have indicated support for our 2-tier premium proposal. 2-Tier concept is reported to be part of dairy package that has been negotiated so far. Troublesome Federal Order provisions from original Peterson bill are also out.

18. Farm Bill Process in High Gear for Rest of 2012 Senate planning Committee mark up of Farm Bill by end of April and Senate floor action before Memorial Day. Will cut $23 billion from ag and nutrition programs over 10 yrs. House to take action by April 27 th to meet House budget mandate of $33 billion in ag. and nutrition program cuts. But process will be for show, since Senate will oppose cut levels. House likely to follow Senate lead on Farm Bill

19. If Farm Bill process bogs down, Dairy in Vulnerable Position The current Farm Bill expires on Sept 30th But the MILC will revert to a lower level of support starting on Sept 1 st. If Congress fails to pass new Farm Bill in time, there may be push for one-year extension. But 1-year extension of reduced dairy safety net not acceptable. Milk prices and margins will come down, and we must be prepared. Dairy package can and should be passed, even if the rest of Farm bill is not ready.