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.
The announcement that the United States has signed up for preliminary talks to negotiate a multi-lateral free trade agreement has been greeted with some caution.
Bernard Hickey points out the fish hooks:
A free trade deal with America will never be a deal to make trade free with America. It is a chance for lobbyists in Washington to make money by blocking our dairy, beef and sheep exports, and for America’s most powerful pharmaceutical companies to kill off Pharmac.
And in a later post shows the response from Jerry Kozak, President and CEO of the National Milk Producers Federation:
“The heightened prospect of greater manipulation by New Zealand of not only global markets, but also our domestic industry and policy, would make an already uneven playing field in the global markets even worse,” Kozak said. “This manipulation of our markets will drive down dairy farmer income in America, force farms out of business, and create a ripple effect swamping dairy plants and other rural businesses – all at a time when our economy is slowing and unemployment is rising.”
If I was a conspiracy theorist I might see a link between this and the survey over how much Chinese people trust food in the wake of the melamine poisoning scandal.
The survey was carried out by Sinogie Consulting whose chief executive Bruce McLaughlin said
There was not much damage to Fonterra at present but that could change in the long term.
“I would say that Fonterra has to keep its head very low in China at the moment. I think if they start shouting too loudly about the Chinese authorities being to blame, then the Chinese authorities will react and it won’t be pretty.”
He’s right that it wouldn’t be pretty, but he doesn’t admit he could be a wee bit biased because as Roarprawn found with a couple of clicks his company does a lot of work for a big US dairy exporter.