Farm Bill Update: Jan. 16, 2014

January 15, 2014 10:13 PM

via a special arrangement with Informa Economics, Inc.

Progress on dairy policy issues | Likely timeline for House, Senate votes

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

Lucas dairy proposal without supply management language gets 'adequate score' from CBO; will likely be part of final farm bill conference report. House Agriculture Committee Chairman Frank Lucas (R-Okla.) said he is circulating a proposal to protect dairy farmers against a drop in milk prices without government production controls.

"We've got a good idea and there are lots of folks looking at it," Lucas said. "Nobody's said ‘no’ so far, and in the world I operate in, it's a miracle."

Lucas did not provide details of the proposal beyond a general goal of giving farmers "a rational market signal without telling you how to turn the valve on your milk tank." Any compromise must avoid "the government telling somebody how much milk to produce or not produce," Lucas added.

Sources say the plan will include flexibility to adjust gross margin insurance coverage and premiums to avoid budget costs in a period of excess milk production. It could also include increased authority for USDA to purchase surplus dairy products.

The dairy policy proposal has been vetted among some in Congress in recent days, and an "adequate" score has been received from the Congressional Budget Office (CBO), sources confirm.

Senate sources provided some additional dairy policy details: Under the current proposal, the USDA Secretary would be given the annual authority to adjust the premium paid by plus or minus five percent, in an effort to make the plan actuarially sound. Also, the gross margin insurance indemnification would be a blended payment when a producer exceeds historical (base) production – the producer would get a full indemnification payment on historical production, but a lower payment on production exceeding the historical base output.


Some sources say the proposal would revive an expired system of federal payment (Milk Income Loss Contract/MILC program) whenever the minimum monthly price for farm milk falls below a certain level. It would serve as a transitional program while a new price insurance plan is set up by USDA. However, other sources say MILC is not currently in the dairy plan being vetted on Capitol Hill.


Likely timeline for getting farm bill conference report to House and Senate votes. A farm bill draft is not likely to be released before next week’s Martin Luther King Jr. Day recess. Formal legislative work could begin on it the week after, but even this would be complicated by a three-day House GOP retreat in Maryland. A vote is possible either the week of Jan. 27 or Feb. 3.

Once the dairy policy issue is settled, and that appears to be nearing, other lingering issues will likely be concluded as well, contacts advise. These include final decisions on country-of-origin labeling (COOL), and crop subsidy provisions.

A producer's individual payment limit will likely be no lower than $105,000 – the current limit for combined direct ($40,000) and counter-cyclical payments ($65,000).

The unified adjusted gross income limit will likely be a three-year average limit of $950,000.

The remaining issue concerns the definition of actively engaged, with the focus being on multiple growers who qualify for the management only option. Sources familiar with the ongoing discussions inform that when final decisions are made, there will be reform regarding actively engaged, with the goal being a "rational" but strong enough definition to get at current abusers of the program. USDA may also be told to further review the topic and provide additional suggestions.

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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