The Dairy Growth Management Plan: An Interesting Note From the Past

Geoff Vanden Heuvel

Director of Regulatory and Economic Affairs

Back when Syp Vander Dussen was MPC’s Board Chairman and Rob Vandenheuvel was our General Manager, Milk Producers Council spent a considerable amount of effort designing and promoting a Growth Management Plan (GMP) for the U.S. dairy industry. The concept behind it was simple – producers who expanded production over an allowable growth rate would pay a fee for the first year of that expansion. Those fees would then be distributed to all the other producers who did not increase production (kind of like the NBA luxury tax).

At the time, we hired Drs. Mark Stephenson and Chuck Nicholson to do an economic evaluation of this idea. Their modeling demonstrated that the presence of these fees would temper milk supply increases just enough to keep supply and demand in a more consistent balance. That smoothing out of the supplydemand relationship was projected to result in higher overall milk prices and minimize the boom-bust cycle the industry had been experiencing for more than a decade.

MPC was successful in generating significant support for this idea, including from the USA Holstein Association, chaired by the late Doug Maddox at that time. The GMP was introduced in both the U.S. House and Senate as legislation. Around the same time, National Milk Producers Federation (NMPF) came up with the Foundations for the Future plan, which included a supply management component. NMPF asked MPC to drop support for the GMP and get behind the Foundations for the Future Plan. We decided to do that believing that working with NMPF would result in Congressional adoption of a new dairy safety net that would have supply adjustment components as well as a more robust safety net to keep the industry in a better place. Much of the Foundations for the Future program was passed in the 2014 Farm Bill, but the supply management component was stripped out by Speaker of the House John Boehner and the maximum benefits of the program were targeted to smaller dairy sizes.

As time has passed, the GMP continues to generate interest from certain sectors of the U.S. producer community. Recently, Drs. Stephenson and Nicholson released an economic study to assess what would have happened if Congress had adopted the GMP in the 2014 Farm Bill.

You can see a video presentation of their findings here. You can read the full report here.

The bottom line according to the study is that the GMP would have slowed the growth in annual U.S. milk production from 2.5% to 2.1%, and that reduction in the increase of the milk supply would have increased average annual milk prices from $0.73-$1.41, depending on which parameters were used of a particular version of the GMP.

Syp, Rob and I spent many days and hours traveling around the country talking to folks about this plan. Maybe we should have pushed a little harder.