Where the silver lining and opportunity for dairy may yet be.
Call me a glass-half-full type of kind of guy and a hapless optimist. But the House of Representatives’ failure to pass a farm bill last month might have a silver lining—and might create an opportunity for a better farm bill down the road.
The failure to pass the bill creates the opportunity of the dairy industry to actually come together – producers, co-ops and processors.
It’s clear (at least to me) that market stabilization is dead on arrival in the House. Some would argue that even with its demise, the House failed to pass the farm bill. Even the Goodlatte/Scott amendment sponsors, Rep. Bob Goodlatte (R-Va.) and David Scott, (D-Ga.) failed to vote for the final bill.
But the overwhelming vote for Goodlatte/Scott, 196 Republicans and 95 Democrats, means market stabilization has little chance of passage. It’s unlikely market stabilization proponents could sway many Republicans to their side, leaving all the heavy lifting to Democrats.
And if market stabilization raises milk prices (as it’s designed and intended to do), it will be difficult to convince another 79 Democrats that raising milk prices for poor, urban consumers is a good thing to do. Click here for the House vote breakdown on Goodlatte/Scott.
With market stabilization off the table, it makes sense to revisit the premium levels for margin insurance. Initially, I believe the premiums for moderate levels of margin insurance were set low to encourage producers to participate. If participation was too high, the market stabilization leg was there to rein in production.
The National Milk Producers Federation is right that high levels of margin indemnities could prove problematic in milk market recovery if surpluses build or there’s a crash in export markets. Offering highly subsidized premiums in this potential environment makes little sense.
It also makes sense to revitalize the Livestock Gross Margin-Insurance (LGM-Dairy) program as well. The margin insurance program is a one-size-fits-all approach. LGM-Dairy allows producers to better tailor their insurance program to their individual rations and markets.
But the on-again, off-again nature of LGM-Dairy has to change if there is any hope of producer participation. Other tweaks are needed as well, including making the program accessible to producers in Class IV markets.
If these tweaks are made, the entire industry must then come together to push for passage of the farm bill. Getting it passed will be tough enough. Arguments over food stamp cuts will again be paramount.
But if dairy issues can be taken out of the debate and the collective will of dairy producers, NMPF and processors is harnessed to pull for passage, the farm bill stands a far better chance.