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New dairy bill introduces supply management plan

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Posted on July 21, 2011 |
By Andrea Suozzo



WASHINGTON, D.C. — Last week Representative Collin Peterson, D-Minn., introduced a proposal that would dramatically overhaul federal controls on the national dairy industry into the U.S. House.

Peterson’s discussion draft bill would introduce dairy market stabilization measures that have been heralded by many in the industry as a solution to national overproduction issues.

The preliminary bill states that existing dairy legislation is ineffective at providing safeguards to the market, citing the 2009 dairy crisis that brought a dip in prices that had many in the industry selling milk for less than the cost of production.

The proposed reform would replace the Dairy Price Support Program, which allows the federal government to purchase dairy products and store them for future sale or use, and the Milk Income Loss Contract (MILC) program, which provides a safety net for farmers when milk prices fall below a certain level (currently set at $16.94).

“Both programs are outdated and fail to provide the strong safety net producers need,” said the fact sheet released with the proposed legislation.

In their stead, two new programs and a reform of the Federal Milk Marketing Orders would be put in place.

The Margin Protection Program would replace the existing MILC program, compensating farmers for catastrophic loss based not on milk prices but on the margins between cost of production (calculated using corn, alfalfa and soybean prices) and the price of milk.

The Dairy Market Stabilization Program would track dairy profit margins over time. When triggered by shrinking margins, the program would pay producers full price for only a smaller percentage of their previous base milk production. Farmers would only be paid in full for between 98 and 96 percent of their previous production, depending on how much margins have shrunk. Farmers would then also get less for the remainder of their production.

The full payments for only a smaller amount of production are intended to encourage farmers across the nation to scale back production levels, according to the fact sheet.

The program attempts to address issues that hounded the industry in 2009, when dairy farmers tried to deal with poor dairy prices by producing more milk, further driving down prices.

Reforms to the Federal Milk Marketing Orders system would simplify the four milk categories —fluid milk, cheese, milk powder and products like ice cream and yogurt — into two classes — fluid milk and milk that is processed into other dairy products. It would also overhaul current systems for determining end-price restrictions.

The Congressional Budget Office has reviewed the discussion draft and determined that it would yield a savings over current dairy programs.

Supply management measures — like the Dairy Market Stabilization Program Peterson is proposing — have enjoyed industry backing. The National Milk Producers Federation has been working since 2009 on a “Foundation for the Future” program that includes market stabilization measures. That proposal has received broad-based support from producers small and large, and the recommendations set forth there are integrated into the proposed dairy reforms.

“I’ve never seen the industry as united as it is now and I appreciate their efforts to work together and find a solution that will ensure Americans continue to have access to a safe and abundant supply of fresh milk,” Rep. Peterson said upon the bill’s introduction.

Rep. Peter Welch, D-Vt., who also serves on the house agriculture committee and has been a major proponent of dairy reform, said that the bill is keeping up the momentum for dairy reform measures.

“This proposal represents a step in the right direction for Vermont’s struggling dairy farmers,” he said. “(Farmers) can no longer endure wild swings in the price for their product as they struggle with rising energy and feed prices.”

Bob Foster, a Middlebury dairy farmer and regional director for the Agri-Mark milk cooperative, expressed concerns over the replacement of the MILC insurance program with one that would cover only catastrophic loss, as did Sen. Bernie Sanders, I-Vt., who nonetheless said that overall dairy reform is needed.

“I am particularly troubled by the proposed elimination of the (MILC) program, a safety net that has proven essential to small dairy farmers in Vermont and across the country,” said Sanders.

But Foster said there won’t be reform without compromise, and Agri-Mark has long supported a supply management program like the one proposed. While he said he hasn’t yet gone through the entire draft, the general outlook seems favorable.

“To me, the alternatives of not doing something are much more disastrous than trying to do something that requires some give and take,” Foster said.

And while he said some take issue with the establishment of a so-called quota system, it’s really just supply and demand.

“If you don’t need the milk, it shouldn’t have the value,” Foster said.

Sen. Patrick Leahy, D-Vt., who serves on the Senate Agriculture Committee, said although the bill appears to address the reforms Vermont dairy farmers have been vocal in supporting, it’s still early, and it’s important in the coming months that the draft be reviewed carefully for their potential effects on Vermont dairy farmers.

“Details are crucial in dairy policy, and it remains unclear if this proposal as drafted would offer Vermont producers — including organic dairy farmers and smaller producers — sufficient protections while also promoting much-needed market stability,” said Leahy in a statement on the proposal.

Leahy said that he and the Vermont congressional delegation would be working in the coming months to provide feedback on the discussion draft.

Welch agreed that the particular details of this proposal have yet to be worked through, but said dairy reform is his top priority

“I am encouraged that it (the proposal) is built on a foundation of much-needed supply management and look forward to working with Vermont’s dairy farmers, and Senators Leahy and Sanders on a plan that ensures not only that they survive but that they thrive.”

Reporter Andrea Suozzo is at andreas@addisonindependent.com.

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