Eliminating the price support program, which at $9.90/cwt. provides a totally inadequate milk price floor, will remove a tool our foreign competitors have used against us. It will allow the U.S. to maintain hard-won export markets and allow the domestic market to clear rapidly, thus shortening the periods of lower than acceptable prices. The export market is growing at a rate many times faster than the domestic market. It is and will continue to be a major driver of demand growth for U.S. dairy products and a key factor in stronger producer milk prices. The Dairy Product Price Support Program interrupts the flow of U.S. dairy products to export markets as occurred in 2009 when the U.S.’s competitors in the world market temporarily dropped their prices below price support program purchase levels. This diverted U.S. products to the price support program resulting in the U.S. losing export market share. This loss of sales resulted in producer prices staying lower longer than had there been no product price support program.
At its current levels – covering 45% of the difference between $13.69, and the actual Class I base price, and providing payment on a maximum of 2.985 million pounds of milk per year – only about 35% of the U.S. milk supply is protected. More importantly, with feed costs at levels two to three times higher than when the MILC program was initiated, a program triggered by such prices does not provide the level of protection needed by a dairy farm of any size.