The US Government’s 2014 Farm Bill included a Dairy Producer Margin Protection Programme (MPP) which, for a token premium, allowed farmers to protect the financial margin between the US milk price and national average feed costs.
A spokesman for Trade Minister Tim Groser said NZ had questioned the US about the programme but they countered that it was permitted within the scope of the World Trade Organisation agreement on agriculture.
“New Zealand views programmes like the margin protection programme as trade-distorting support,” Groser said in a statement responding to questions raised by the NZ Farmers Weekly.
“In the context of the Doha negotiations, we have been actively seeking stronger disciplines on this type of support in the WTO.”
Trans Pacific Partnership (TPP) negotiations have focused more on export subsidies as opposed to domestic support measures such as the MPP, he said.
The degree of MPP protection is chosen by farmers who pay an annual $100 registration fee for which they receive free margin coverage of $US4 per hundredweight. Above that coverage can be bought in incremental steps.
Documents compiled by the National Milk Producers Federation showed the programme paid two months’ worth of the farmer’s annual production history multiplied by the percentage of cover chosen, from 25% to 90%.
The margin was defined as the US milk price minus national average feed costs, calculated using the prices of corn, soybean meal and alfalfa hay along with the cost of feeding dairy animals.
The programme was designed to insulate farmers against what the federation called “the catastrophic losses” they experienced on 2009 and 2012.
The margin had averaged $US8.50 per hundredweight since 2004, reaching $14 in 2007 but dropping to $3 in 2009 and 2012.
“Under the MPP even free coverage would have provided a backstop at the $4 margin level.”
US media reported that by the US autumn, 23,000 dairy farmers had signed up with half of those seeking coverage beyond the basic level.
