The Death of Supply Management
Jan 24, 2014
The National Milk Producer Federation’s announcement that supply management was dead was a stunning concession.
It was one of those watershed moments that will remain in your memory—like the discovery of the BSE cow in Washington 10 years ago and the FDA announcement that BST was approved 20 years ago.
On Jan. 16, the National Milk Producers Federation (NMPF) issued a statement conceding that supply management was dead. Yesterday, the Senate/House Conference Committee reported out its farm bill compromise, and market stabilization was nowhere to be found.
After four years of meetings and resolutions and all-out lobbying, one of the cornerstones of NMPF’s "Foundation for the Future" plan was dead on arrival in the U.S. House of Representatives. NMPF conceded:
"Despite the long-standing opposition to this plan from House Speaker John Boehner, we were confident we had the votes in the conference committee to defeat any amendment to strike the market stabilization program," Jim Mulhern, the new president and CEO of National Milk said in his statement.
"Unfortunately, the Speaker’s threat that he would not allow a vote on a farm bill containing the market stabilization program has effectively served to kill our proposal within the committee."
Boehner’s opposition to supply management, or as National Milk dubbed its plan, market stabilization, is well known. The Speaker of the House likened it to Soviet-style economic planning.
Boehner's opposition resulted in a 2:1 vote against the provision when the farm bill was debated in the House last summer. That alone signaled that a House-Senate conference committee report containing dairy supply management would have tough sledding once it reached the House floor for a final vote.
After yesterday's Conference Committee report, Mulhern believes new provisions that establish a production base for each farm (the highest annual production of 2011, 2012 or 2013) cannot be used as an incentive to expand production. "Importantly, the program doesn't discriminate against farms of differing sizes, or preferentially treat those in differing regions," he says.
Margin insurance is the cornerstone of the new dairy policy, but it will have to tweaked to make sure farmers use it as a risk management tool as it’s intended. You can read a summary of the new dairy provisions here.
That will mean sign-up deadlines sufficiently far out so that farmers won’t know with a lot of certainty milk and feed markets. Premium payments also should be strutured so that they could be paid from indemnities or profits at the end of the insurance year rather than at the beginning.
This farm bill process, the longest in history, has been one heck of a ride. Let’s hope implementation will go a whole lot smoother.