US dairy head calls for balance

14/04/2010

Jerry Kozak, head of the USA’s Milk Producers’ Federation is calling for a move away from the dairy product price support programme (DPPSP).

. . . is the dairy product price support program the best use of federal resources to establish a safety net to help farmers cope with periods of low prices? Is it effective? I believe, the answer today on both counts, is no.

He says the DPPSP reduces total demand for US dairy products, dampens the ability to export and encourages foreign imports; acts as a disincentive to product innovation; supports dairy farmers elsewhere at the expense of US dairy farmers; it isn’t effectively managed to fulfil its objectives and the price levels it seeks to achieve aren’t relevant to farmers in 2010.

For all of these reasons, what NMPF is now focused upon is a transitional process that shifts the resources previously invested in the dairy product price support program, to the income protection program that I have discussed previously.

In summary, discontinuing the DPPSP would eventually result in higher milk prices for U.S. dairy farmers. By focusing on indemnifying against poor margins, rather than on a milk price target that is clearly inadequate, we can create a more relevant safety net that allows for quicker price adjustments, reduced imports and greater exports. As a result of our DPPSP, the U.S. has become the world’s balancing plant. As time marches on, so, too, must our approach to helping farmers.

He’s not suggesting an end to subsidies but it is an acceptance that the current subsidies don’t work which has been welcomed by Fonterra and Federated Farmers.

There is still a long way to go, however.

My geographically challenged post yesterday on US trade protection reminded Off Setting Behaviour of  a Washington Post story on how the dairy industry crushed  Hein Hettinga, an innovator who bested the price-control system.

It’s four year’s old and long – five pages – but an instructive, if depressing read, on the dangers of protection.


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