This past week, Representative Jim Costa (Fresno) and four of his colleagues in the House of Representatives introduced H.R. 5288, the Dairy Price Stabilization Act of 2010.  In short, the legislation would create a tangible financial incentive for all U.S. dairy farmers to better manage their growth in milk production.  Also co-sponsoring the bill are Reps. Peter Welch (Vermont), Rick Larsen (Washington), Joe Courtney (Connecticut) and John Larson (Connecticut).  The text of the bill and summaries can be found at www.stabledairies.com.

H.R. 5288 is the product of several years of work in developing a production management program that allows our nation’s producers to continue growing to meet our increasing demand for dairy products, while at the same time creating a financial incentive that will help ensure that not all 65,000 producers expand their production at the same time, collapsing the value of milk and dairy products every few years, as our producers have become painfully familiar with.

The bill utilizes industry analysis that’s been done over the past three years regarding the root causes of milk price (and farmer profit margin) volatility, which has continued to grow and become more violent with each “boom” and “bust.”  Multiple economic forums have been held over the past couple years to look at milk price volatility, and additional work has been done by Dr. Mark Stephenson (Cornell University) and Dr. Chuck Nicholson (Cal Poly University, San Luis Obispo) on the specific issue of finding the driver for this increased volatility.  Those efforts have revealed that much of the volatility in the value of raw milk can be attributed to cyclical patterns, some of which result from government policies that mute direct market signals to individual dairy farmers.  The goal of the H.R. 5288 is to create a direct economic signal to the dairies that will help individual farmers make more informed decisions when deciding on future growth of their individual milk production.

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