Peterson Testing Boehner Resolve on Dairy Policy Change

November 1, 2013 12:35 AM

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Peterson says he has votes for dairy supply management plan, but others doubt count

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

The wheels are turning regarding lawmaker involvement in getting what they want in and out of the pending farm bill in conference sessions now. One key issue will be a major change in dairy policy via the new farm bill.

Some consumer groups told farm bill conferees that including the Senate-passed dairy policy plan that includes supply management to discourage surplus milk production could boost the retail price for consumers and increase the federal government's cost of running food aid programs.

Rep. Collin Peterson (D-Minn.), ranking member on the House Ag Committee, said a compromise dairy policy plan is still possible, but details are lacking. Some say it is a hybrid between the gross margin safety net program contained in both the Senate- and House-passed bill, and a Milk Loss Contract (MILC) program for certain size dairies.

The letter. Consumer Action, the Consumer Federation of America and the National Consumers League cosigned an Oct. 30 letter to the 41 farm bill conferees urging that negotiators reject the Dairy Market Stabilization Program in the Senate bill. They were told instead to adopt the House farm bill (HR 2642) language that does not include the stabilization (supply management), which would reduce participating farmers’ dairy checks if there were indications of an impending surplus that could reduce market prices for their goods. The reductions would be a signal to dairy farmers to cut back on production to keep market prices from falling.

The groups noted that a Congressional Research Service (CRS) report said that the stabilization plan is designed to raise market prices. "Programs which artificially increase milk prices will hit lower income consumers the most as they spend a higher proportion of their incomes on food than do other consumers. Price increases caused by the DMSP would also negatively impact federal nutrition assistance programs, on which millions of low-income families depend, by increasing program costs and reducing their purchasing power," the groups wrote.

Background on farm bill and dairy policy proposals in House and Senate farm bills. For dairy policy, both the House and Senate bills contain similar, significant changes, including elimination of the dairy product price support program, the Milk Income Loss Contract (MILC) program, and export subsidies. These are replaced by a new program, which makes payments to participating dairy producers when the national margin (average farm price of milk minus average feed costs) falls below $4.00 per hundredweight (cwt.), with coverage at higher margins available for purchase. A provision in S 954 makes participating producers subject to a separate program, which reduces incentives to produce milk when margins are low — this provision is not present in HR 2642. In addition, HR 2642 requires USDA to adhere to standard rulemaking procedures and to determine the market impacts of the new program during the rulemaking process. Separately, federal milk marketing orders have permanent statutory authority and continue intact. However, S 954 (but not HR 2642) includes two additional provisions: one that requires USDA to use a specified pre-hearing procedure to consider alternative formulas for Class III milk product pricing, and a second that requires USDA to analyze and report on the potential effects of replacing end-product pricing with alternative pricing procedures.

Senate Agriculture Chairwoman Debbie Stabenow (D-Mich.) and Peterson support both the insurance plan and the milk supply management system. However, Peterson lost a major floor vote in June over the milk supply issue when the House approved an amendment to remove the plan, 291-135. That means House Ag Chairman Frank Lucas (R-Okla.), who chairs the farm bill conference, would very likely want to follow "the will of the House" and fight any move to return supply management language to the dairy policy provisions.

Opponents of dairy supply management had a strong backer, House Speaker John Boehner (R-Ohio), who compared the dairy supply plan to a "Soviet-style" system that would require the federal government to intervene in the marketplace.

But Peterson believes that an insurance-only approach could encourage overproduction and result in a more costly plan for taxpayers. On Wednesday, he said the leaders of the Agriculture committees have been discussing possible compromises, but did not provide any details. He predicted that if there is no agreement on an acceptable alternative, then conferees would likely support the Senate bill on the issue – a prediction not shared by other congressional sources and contacts. Still, Peterson said he has the votes and said the House approach is "i"unworkable and unacceptable."

As for Boehner, Peterson said that while the Speaker has strong feelings about the dairy program, he thought it unlikely Boehner would block the bill over the issue. "He has bigger fish to fry," Peterson said, according to Congressional Quarterly.

But are Peterson's thoughts about Boehner correct? Some sources believe Peterson is wrong regarding Boehner. Said one veteran contact: "People want to call the Speaker’s bluff on this then they do so at their own peril. They also thought the Speaker had bigger fish to fry last year leading up to the fiscal cliff/milk cliff negotiations when they tried to cram a 53-page new dairy program into a farm bill extension. Then the Speaker stood up and delivered a discourse on the absurdity of dairy policy and well, we know how the rest of that went. So call the Speaker’s bluff but be forewarned."

If Peterson’s argument about cost to the taxpayer holds water, another source asks, "Then why did CBO score the Goodlatte Dairy Freedom Act at a savings compared to Peterson’s Dairy Security Act?" Moreover, the source added, "If Peterson is concerned with the cost to the taxpayer and in turn the actuarial soundness of the program, why does the Dairy Security Act task USDA's Farm Service Agency (FSA) with administration of the program and not the Risk Management Agency (RMA)? If this is truly about risk management in a financially prudent way, lets put the RMA in charge of it."

Those are two good questions in search of answers – just like the fate of the dairy policy program.


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






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