Current federal policies give the dairy industry the distinction of being the single most government subsidized and regulated of all U.S. agriculture.
Dairy programs today require the federal government to intervene in the marketplace by: setting prices; paying farms to produce milk; buying, storing, and disposing of surplus milk products; requiring reporting and standardization; subsidizing exports; and enforcing restrictions on dairy imports.

Today's outdated policies, which have their roots in the Great Depression period, do not best address the diverse structure and top priorities of the industry today and should be updated in the 2007 Farm Bill.

Over the decades, more dairy programs and regulations have layered over old dairy policies resulting in a complex web of government intervention in the modern dairy industry. The Milk Programs Complexity Chart helps to visualize the complexity and interactions of dairy programs and the significant impact they have in the dairy marketplace.

• What is the Dairy Price Support Program?
  The Depression-era Dairy Price Support Program sets a milk price floor by requiring USDA to buy and store surplus cheese, nonfat dry milk, and butter.
  
  
• Why reform the Dairy Price Support Program?
  Since the 2002 Farm Bill, and over the past six decades, the cyclical purchases and inventory accumulation by USDA under price support have resulted in costly government stockpiles and mishandling of disposition when these stocks are dumped on the commercial marketplace. Price Support discourages production of higher valued milk protein products and accounts for the largest share of trade distorting domestic supports in all of U.S. agriculture.
  
  
• IDFA's Price Support Policy Recommendations.
  Phase out the price support program and establish programs that support farmers without distorting markets or international trade. A revenue-insurance-based federal safety net would protect dairy farms against severe revenue downturns and, with a new direct payment program (see below), would be a better safety net for dairy producers.
  
  
• See the following links for more information on price support:
  USDA Price Support Program Fact Sheet
  Blueprint for the 2007 Farm Bill: Price Support Program

• What is the MILC program?
  The Milk Income Loss Contract (MILC) program, created in 2002, makes monthly income payments directly to farmers whenever the price of milk in Boston falls below a target price.
  
  
• Why reform the MILC program?
  MILC payments result in lower milk prices, which conflict with the price support program, adding to surpluses that must be purchased by USDA. USDA found that the combination of MILC and the price support program have minimal impact on sustaining farm revenue. The MILC program discriminates against certain parts of the country and favors certain farms over others.
  
  
• IDFA's MILC Policy Recommendations.
  IDFA supports a new payment program for dairy farms that is not based on price triggers or current production, and that provides farmers with reliable income enhancements to improve their environmental stewardship while providing the public with environmental benefits, and greater U.S. compliance with global trade obligations.
  
  
• See the following links for more information on MILC:
  USDA Milk Income Loss Contract Fact Sheet
  Blueprint for the 2007 Farm Bill: Milk Income Loss Contract

• What are FMMOs?
  The 70-year-old Federal Milk Marketing Order (FMMO) system sets minimum prices that govern how milk buyers pay farmers. FMMOs price milk by how it is processed: Class I for fluid milk products, Class II for soft manufactured products like ice cream, yogurt and fluid creams, Class III for hard cheeses, and Class IV for butter and dry milk products.
  
  
• Why reform the FMMO system?
  The FMMO system creates unnecessary conflict amongst stakeholders, inhibits consumer-minded innovation, and reduces efficiency and competitiveness of dairy in the food and beverage industry. FMMOs affect certain regions and segments of the industry differently, and result in cumbersome regulatory battles between producers from different parts of the country over how the government sets milk price formulas.
  
  
• IDFA's FMMO Policy Recommendations.
  IDFA believes that FMMOs need to undergo a serious and comprehensive examination and proposes to establish a blue ribbon commission composed of producers, processors, and experts to identify needed improvements in the FMMO system.
  
  
• See the following links for more information on FMMOs:
  USDA FMMO Website
  Blueprint for the 2007 Farm Bill: Federal Milk Marketing Orders

• What is Forward Contracting?
  Forward Contracting is the right of all milk buyers and sellers to enter into voluntary sales contracts for future delivery of milk at a set price. Beginning in 2000, the USDA ran a successful dairy forward contracting pilot program with over 2,000 participating dairy producers; however, the program expired in 2004 without renewal.
  
  
• IDFA's Dairy Forward Contracting Policy Recommendations.
  IDFA is proposing that a permanent forward contracting program be established to allow voluntary price stability through sales contracts between all milk buyers and sellers.
  
  
• See the following links for more information on Forward Contracting:
  USDA AMS Forward Contracting Questions and Answers
  USDA AMS Forward Contracting Complete Report
  Blueprint for the 2007 Farm Bill: Forward Contracting

• What is the Dairy Import Assessment?
  The 2002 Farm Bill included an advertising and promotion assessment on imports of dairy products. The program was never implemented because USDA and the U.S. Trade Representative determined that it would violate trading rules under the World Trade Organization (WTO).
  
  
• Why repeal the Dairy Import Assessment?
  If the 2007 Farm Bill includes changes to require implementation of the dairy import assessment, it would expand funding for the current Dairy Check-off Program and could be very harmful to the US dairy industry. Dairy import assessments could cause challenges under the WTO rules on US exports of dairy products.
  
  
• IDFA's Dairy Import Assessment Policy Recommendations
  IDFA supports repeal of the Dairy Import Assessment.
  
  
• See the following links for more information on the Dairy Import Assessment Program:
  Blueprint for the 2007 Farm Bill: Dairy Import Assessment