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Dairy Margin Proposal Would Cut 2013 Spending

February 28, 2013

 Source: University of Missouri

Dairy producers will seek a new safety net when farm bill discussions restart in Congress, said a University of Missouri dairy economist at the recent USDA Agricultural Outlook Forum. Current proposals look more like insurance than price programs of the past.

But with financial binds in Washington, there are no easy answers, said Scott Brown of the MU Department of Agricultural and Applied Economics.

"With rapidly rising feed costs, dairy interest turned to a margin insurance plan," said Brown. That’s a shift by milk producers from years of price-support programs in the federal act.

One thing is certain: There will be less federal money for any new policy compared to past levels. "Projected CCC (Commodity Credit Corporation) outlays for current dairy policy declines yet again," Brown said.

He added that it is too early in the 2013 farm bill process to know where dairy policy might fit in.

Congress has many issues to settle before farm bill debate begins, Brown said. "Budget clarity is a big issue."

With scant money, any federal dairy policy might have little impact in helping producers hard hit by economic turmoil in recent years.

To put dollar power in focus, Brown did the math. Last year, USDA estimated 2012 dairy cash receipts at $37 billion. A billion with a "B."

For the expected 10-year farm bill, the Congressional Budget Office lays out dairy spending at $28.4 million a year. A million with an "M."

Dairy spending compared to receipts is less than one percent: Actually, 0.08 percent.

Brown told policy analysts, "An effective program is hard with such small annual outlays." Policymakers seek a balance that attracts producers to the program yet doesn’t overspend federal dollars. If the first proposal fails, either way, that means reopening policy talks in 2014 or 2015.

Dairy groups know the situation and propose legislation based on margin protection instead of prices.

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RELATED TOPICS: Dairy, Policy, News, Risk Management, Issues



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