Dairy Policy & Directors’Leadership Conference

April 5, 2011

DIAC Mission

Review issues of:

• Farm milk price volatility

• Dairy farmer profitability

AMPI Perspective

Construct dairy policies that support family farms, not milk volume.

Top Upper Midwest issues

• Price support and DEIP

• MILC and Margin

• Growth management

• Federal milk market orders

Explore elimination of the dairy product price support program and the dairy export incentive program and use budget savings to enhance the safety net for producers.

Price Support and DEIP

Modify Milk Income Loss Contract program and provide a margin insurance option using funds from the elimination of the Dairy Product Price Support Program and DEIP.

MILC and Margin

Structure, U.S. Dairy Herds

MILC

% of herds % of milk

Year fully covered eligible

2002 87.9% 54.9%

2008 83.3% 40.6%

2010 81.8% 37.8%

Measuring margin

• Margin defined as:• All Milk Price – Total Feed Cost Per CWT• New NMPF- developed feed cost ration

includes all cattle (dry cows, hospital cows, replacement heifers, calves)

Margin

Year Margin (cwt.)

2008 $6.85

2009 $3.89

2010 $6.97

2011 $6.52

MILC vs. Margin

Payment Rate Payment Rate

Year MILC (cwt.) DPMPP (cwt.)

2002 $1.21 --

2003 $1.09 --

2004 $0.22 --

2005 $0.22 --

2006 $0.01 --

2007 $0.61 --

2008 $0.01 --

2009 $1.15 $1.35

2010 $ .02 --

2011 $ .00 --

MILC v. FFF $4 Margin Target

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

$/C

wt

MILC

$4 FFF Margin

MILC vs. FFF $4 Margin Target

Growth management

Adopt a growth management program

Growth Management Plans

• Reduce milk price volatility

• Reduce cost of counter-cyclical dairy programs

• Allow for continued growth

• Not significantly enhance milk prices

Growth Management

What is the farm bill going to cost?

• CBO scoring

• Subsidies

Federal milk market orders

Review federal milk marketing orders

Why revise FMMOs?

• End-product pricing formulas, make

allowances

• Class I differentials

DIAC Mission

Review issues of:

• Farm milk price volatility

• Dairy farmer profitability