1	National Dairy Policy: Where Are We Headed? 31^st Annual Southern Dairy Conference Scott Brown Food and Agricultural Policy Research Institute www.fapri.missouri.edu
2	I have better odds of winning the Powerball jackpot than…. Guessing the future of dairy policy Remember that FAPRI will not endorse a particular policy FAPRI is in business to provide quantitative analysis
3	Federal Budget Surplus/Deficit
4	President’s Budget There are still questions to be answered about the details – Secretary of Agriculture’s testimony to the House Agriculture committee this Wednesday should help clarify some of the changes Net CCC outlay reductions of $5.7 billion over the next 10 years MILC program extended through FY07 (at a cost of $1.2 billion) MILC program takes a 5% reduction in payments (think of the current 45% moving to 42.75%) Minimize the cost of the price support program
5	What are the next steps in the budget process? Congress could adopt the President’s budget Congress could hit the same savings target for agriculture as in the President’s budget but have a different mix of cuts There is a lot of work left to do and it could take time to reach an agreement on the overall budget
6	What does that mean for dairy programs? It is hard to envision a better spending scenario than is seen in the President’s budget No MILC after FY05 under current law President’s budget spends $1.2 billion in FY06-FY07, few other cases of increased spending in the agriculture budget Price support program changes under the President’s budget? Congress could decide not to spend additional money on federal dairy programs Congress could decide to spend the additional $1.2 billion on a different kind of program Modified MILC National Dairy Equity Act (NDEA) or a similar program Something completely different
7	Total CCC and Dairy Expenditures
8	New Players on the Agriculture Committees House Chairman – Bob Goodlatte (VA) Ranking Member – Collin Peterson (MN) Senate Chairman – Saxby Chambliss (GA) Ranking Member – Tom Harkin (IA)
9	U.S. All Milk Price
10	Will the regional dairy battles subside? Very different structure around the country
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13	A review of the MILC program FAPRI has estimated the MILC program lowers market prices for milk $0.25 to $0.50 lower depending on how long the program is in place An additional 1.4 billion pounds of milk produced MILC is a counter-cyclical program It has a production cap No historical base Payment rate based on 45% of the difference in prices
14	MILC Payment Rate
15	Who has benefited from MILC payments?
16	Milk production eligible for MILC payments with a 2.4 million pound cap
17	Milk production eligible for MILC payments with a 4.8 million pound cap
18	We could have a very different dairy program Something like the National Dairy Equity Act (NDEA) Something else completely new
19	National Dairy Equity Act Regions
20	NDEA features Collect over-order premiums on fluid milk (not pooled) Allow low class I areas to receive payments from the CCC to put an effective floor on class I use of 50 percent This year’s version of a NDEA-type program would likely have new features
21	U.S. All Milk Price Under NDEA Alternatives
22	Summary TOO EARLY to jump to conclusions about future federal dairy policy The President’s budget does allow for a MILC extension How Congress chooses to hit budget targets remains unknown