Dairymen in US want guarantee on milk margins

Caitriona Murphy

Dairy farmers in the US are lobbying for a new milk margin insurance scheme to protect farm incomes from the effects of severe market volatility.

The National Milk Producers Federation (NMPF) has proposed several new milk measures to control milk supply and prices but the suggestion garnering most attention is a margin insurance scheme.

The proposed scheme would be based on farmers' margins on milk production or simply the differential between the milk and feed prices.

The NMPF proposes that when farm margins fall below a range of values -- for example, €2, €4 or €6/100kg -- milk payments to suppliers would be stopped beyond an agreed point. For example, if margins fell by €4/100kg, farmers would only be paid for 97pc of the milk they supplied compared to a reference point.

Dairy boards would use the money saved on the remaining 4pc of milk to buy cheese on the domestic US market and give it to US charitable organisations for use in food stamp schemes.

The proposal would have the double-pronged effect of creating demand on the US market by buying cheese and constraining supply from farmers who would not continue feeding their cows knowing they would only be paid for 96pc of milk supplies.

Industry experts say the NMPF proposal is likely to appeal to the United States Department of Agriculture (USDA) because of its self-funding nature at a time when finance is under pressure in all government departments.


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However, critics of the scheme point out that not all farmers operate to the same margin and a two-month delay before the scheme kicks in creates too long a lag between lower milk returns and a subsequent reduction in milk supplies.

Michael Barry of the Irish Dairy Industries Association said using a margin-based scheme in Europe would be a very blunt approach to dealing with market volatility but it was interesting to see the different approaches to the same problem.

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