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New federal policy proposals could damage dairy industry, says IDFA

By Caroline Scott-Thomas , 14-Jun-2010

Newly agreed supply management policy in the dairy sector could hurt industry by encouraging consumption of lower priced non-dairy foods, the International Dairy Foods Association has said.

The association’s comments come in response to a statement from the National Milk Producers Federation (NMPF), which has outlined its proposals for US dairy policy reform in a new document entitled Foundation for the Future. The NMPF said the changes in federal dairy policies are intended to protect dairy farmers and “position them more favorably in an increasingly volatile global marketplace.”

Among other measures included in the document, the NMPF said it would seek to tackle the low dairy prices that the industry has seen over the past 18 months, partly through a Dairy Market Stabilization Program. This would send “strong and timely signals to producers that a small percentage of additional milk production may have significant consequences on their overall margins,” NMPF said.

Non-dairy substitution

But the International Dairy Foods Association (IDFA) said that this part of the Foundation for the Future plan was “not forward-looking”.

IDFA president and CEO Connie Tipton said: The plan's Dairy Market Stabilization Program, which is intended to increase prices and limit growth, will have dire consequences for our industry and consumers. Supply management will decrease demand for dairy products and dairy ingredients, and will drive low-cost non-dairy substitutions in foods and restaurants across the country. Supply management will limit industry growth at a time when demand for US dairy exports is growing, and we have a unique opportunity to innovate and expand to serve global markets.”

Common ground

However, she added that the association did support other elements of the plan, including the margin insurance program, which would be used in place of price supports for dairy producers.

Tipton said: “This margin insurance program, coupled with new risk management tools to better manage price swings, will go a long way to allow the US dairy industry to remain competitive, both with dairy ingredients in the domestic market and the growing world dairy trade.”

Immediately following the release of the Foundation for the Future document, NMPF president and CEO Jerry Kozak said: “It’s clear we need a new safety net that focuses on margins, not just milk price. It’s also clear we need a system that sends timely, unmistakable signals to farmers that less milk is needed during periods of relative imbalance. The Foundation for the Future addresses both of those key issues, and it does so in a fiscally responsible, politically realistic fashion.”

The NMPF proposals contained in its new document will be used as the basis for the future direction of the dairy provisions in the next Farm Bill, or in some other form of federal legislation that Congress may consider in the future, the foundation said.

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