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Michigan Dairy Farmers’ Views of Current Dairy Policies    

Christopher Wolf
Dept. of Agricultural, Food and Resource Economics

Introduction
Current dairy policies include federal milk marketing orders, a price support program, the Milk Income Loss Contract program (MILC), as well as trade instruments including export incentives and import tariffs. Milk marketing orders define minimum farm prices for Grade A milk based on end use. The relative use of milk by class in the federal orders is used to weight a minimum blend price that all farmers must be paid.  The use of wholesale product prices has been controversial in recent years with concerns that the wholesale prices can be manipulated.

The Price Support Program, formally named the Dairy Product Price Support Program in 2008 Farm Bill and formerly the Milk Price Support Program from 1949-2007, is an open offer to purchase butter, cheese, and nonfat dry milk at set product prices. The Price Support Program has been criticized in recent years for curbing product innovation, supporting world dairy product prices, and being generally insufficient for U.S. farm prices at current feed costs. Trade policies include the Dairy Export Incentive Program (DEIP) which subsidizes exports of dairy products. These export subsidies were crucial to moving excess dairy products in past decades but U.S. product prices have been very competitive in recent years. Dairy programs also include the promotion programs where dairy producers pay 15 cents for each hundredweight of milk produced which is used for promotional activities. 

Factors Affecting Dairy Debate

Several factors relate to the current dairy policy debate including farm size and regional conditions. Some policies, such as the MILC program, have an explicit size bias. Others are perceived to be biased to large herds. 

To examine Michigan dairy producers’ opinions of the current dairy policies, a list of operations with a license to ship Grade A milk was obtained from the Michigan Department of Agriculture in April 2011. The list contained the names and addresses of 2,156 operations from which 1,102 were randomly selected resulting in 226 useable surveys returned for a 20.5 percent response rate.
           
The survey collected information about the operator and operation. Respondent herd size varied from 8 to 5,400 milk cows. Average respondent herd size was approximately 300 milk cows which was larger than the average operation with milk cows. The survey also collected information about the dairy farmer respondent views on current dairy policy programs.
 
Figure 1: Dairy producers’ opinions of policy program effects on dairy
farm profitability. 

mmmgraph
Scale: 5= strongly agree, ..., 3= neutral, ..., 1= strongly disagree.

A set of survey questions inquired about producers’ opinions of current dairy policy programs including the price support program, milk marketing orders, the MILC program, Dairy Export Incentive Program (DEIP), and promotion check-off programs. 

Because past research, and a great deal of anecdotal evidence, suggests that opinions about policies varies by herd size, we divided responses to those with herds less and greater than the average respondent herd of 300 milk cows (the average herd size in our sample).

One survey question inquired as to how important the programs were to their farm profitability. Figure 1 displays the average score (where 5 = very important to 1 = not important). Across all farms, the programs thought to be most important were the Dairy Export Incentive Program (DEIP), promotion and marketing orders. The least important programs were the price support and MILC programs which are the programs that were designed to directly support dairy farm income. The MILC program is divisive across herd size as it is relatively more supportive of small herds because the payments are capped based on milk produced. Accordingly, the MILC program has been unpopular with the large dairy herd owners.

The price support program is currently considered irrelevant and antiquated because the product price translate to farm milk prices are below the current cost of production. Many producers view it as supporting world dairy prices, squelching the incentive to innovate, and generally making U.S. dairy products less competitive in the global market. The price support program also was unpopular with large herd owners. Farms of all herd sizes had favorable views of the DEIP and the promotion programs.
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Michigan Dairy Review is published and mailed to all Michigan dairy farmers and individuals working in allied industries. With its ever increasing on-line presence, the MDR target audience has spread beyond Michigan and the U.S.; today electronic subscribers are located in places such as Australia, The Scandinavia, Italy, Mexico, Ireland, Peru, and New Zealand.  

The MDR is the primary communications vehicle for research findings, extension programming, and teaching between faculty and staff in MSU dairy programs and the dairy industry. The MDR web site is paid for by the C. E. Meadows Endowment.




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