Michigan Dairy Farmers’ Views of Current Dairy Policies
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.
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.
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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