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Subcommittee Holds Audit Hearing on Dairy Programs

19:18PM Sep 08, 2011

Committee members hear concerns that current dairy programs don’t provide a meaningful farm-level safety net.

WASHINGTON – Today, Rep. Thomas Rooney, Chairman of the House Agriculture Committee's Subcommittee on Livestock, Dairy, and Poultry held an audit hearing to examine USDA dairy programs.
This is the 10th hearing in the series on farm policy that is designed to provide oversight of current spending to ensure programs are delivered effectively. It also provides members of the committee with a comprehensive view of farm programs.
Current dairy programs include the Dairy Product Price Support Program (DPPSP), Milk Income Loss Contract (MILC) Program, Dairy Export Incentive Program (DEIP), Livestock Gross Margin Insurance for Dairy (LGM-Dairy), and Federal Milk Marketing Orders (FMMOs). Members of the subcommittee heard testimony about how these programs are working, current conditions and productivity in the dairy industry, and possible public policy challenges moving forward.
“The events of 2009 exposed what many have long held to be an inadequacy of some of our current dairy programs,” Rooney said. “While some observers may argue that additional funding may improve the overall effectiveness of our dairy safety net, our current budgetary outlook makes this option a non-starter. 
“Innovative and effective ideas are needed to ensure that our programs support our producers, facilitate product and market development, and continue to ensure the availability of safe, abundant, and affordable products for our consumers,” added Rooney. “Today’s hearing provided our subcommittee with an important perspective about the strengths and weaknesses of our existing programs.”
"The dairy industry has always faced a rocky road, but the past few years have been particularly hard for California producers,” said Ranking Member Dennis Cardoza (D-Calif.). “It is extremely important that future dairy policy builds a strong base so dairies can continue to produce milk and consumers can continue to enjoy domestically produced products here at home.”
After attending the hearing, NMPF President and CEO Jerry Kozak said, “The general tone of the questions at today's hearing from the committee members indicates a concern that current dairy programs are not up to the task of providing a meaningful farm-level safety net. NMPF shares that concern, and that's what has driven the creation of Foundation for the Future. We believe we have the best answer to the bottom line question of what should come next for dairy policy.”
In statements prepared for the hearing, John Wilson, Dairy Farmers of America’s senior vice president said: “While dairy prices have recovered from the historic lows experienced in 2009 and 2010, most producers have not. The recent low-price cycle devastated dairy families, drained generations worth of equity, and drove many out of the business entirely. Those dairy producers who survived the cycle are still struggling because of shrinking margins, due in great part to increasing feed costs.  

“Now, more than ever, we are a global industry, and factors in the world market have a great impact on domestic prices,” Wilson said. “Domestic dairy programs are outdated and inflexible, stifling much needed innovation. They do not and cannot offer producers the tools necessary to manage global market changes or the tight margins that result from either low milk prices, high feed prices or a combination of both.

“It is evident current programs are flawed,” added Wilson. “They are insufficient in times of extreme volatility, which seems to be the norm rather than the exception, and do not provide an adequate safety net when margins are tight. We urge Congress to review and consider the policy proposal authored by Reps. Collin Peterson, D-Minn., and Mike Simpson, R-Idaho, which consists of three main components — a margin protection program, a Dairy Market Stabilization Program and reforms to the Federal Milk Marketing Order system — and would alleviate some of the anxiety livestock producers face.
These policies take into account not only milk prices, but also recognize feed prices and, ultimately, margins. The proposal is sound, affordable and will be instrumental in strengthening the domestic dairy industry.”