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Published October 03, 2011, 07:33 PM

CBO estimates 60 percent of producers would sign up for program

WASHINGTON — While a key element in the dairy reform bill introduced by House Agriculture Committee ranking member Collin Peterson, D-Minn., would be voluntary, the Congressional Budget Office has estimated that the producers of at least 60 percent of the nation’s milk would sign up for it, according to National Milk Producers Federation President Jerry Kozak.

By: Jerry Hagstrom, Special to Agweek

WASHINGTON — While a key element in the dairy reform bill introduced by House Agriculture Committee ranking member Collin Peterson, D-Minn., would be voluntary, the Congressional Budget Office has estimated that the producers of at least 60 percent of the nation’s milk would sign up for it, according to National Milk Producers Federation President Jerry Kozak.

Peterson’s draft legislation, based on a National Milk proposal, made participation in the dairy market stabilization program mandatory, but after some dairy farmers told National Milk officials during a series of meetings this summer that they did not want participate, National Milk’s board voted to support an optional program.

The bill that Peterson and Rep. Mike Simpson, R-Idaho, introduced Sept. 23 made the program optional, but said that if dairy farmers want protection against the margin between dairy prices and input costs, they will have to participate in the market stabilization program, which would put some restrictions on their ability to produce milk when prices are low. Peterson and Kozak both have said that lenders will put pressure on the dairy farmers to participate in the program.

Calculating savings, costs

In a Sept. 26 call to reporters, Kozak said CBO has estimated the bill would save $167 million over the first five years, but only $131 million over 10 years while continuing current programs would cost the government $672 million.

Kozak said CBO’s reasoning behind higher savings in the first five years was the elimination of the milk income loss contract program, the dairy export incentives program and milk price supports.

He also said it is harder for CBO to calculate savings and expenditures in the second five years of its program estimates. Kozak said he thinks the 20 percent savings over 10 years would attract the support of members who do not have much dairy production in their states, but want to reduce the federal deficit.

Senate support?

The bill has not yet been introduced in the Senate, but Kozak said he is “optimistic” that a senator will come forward to do so.

Sens. Kristen Gillibrand, D-N.Y., and Amy Klobuchar, D-Minn., have said they want to save at least some of the elements of the MILC program, but Kozak said he thinks Gillibrand’s and Klobuchar’s serious interest in dairy policy will lead them to consider the bill.

Kozak said he is concerned about the prospect that milk prices will go down next year while feed prices stay up, as they did in 2009, but that the proposal is not written in reaction to the conditions in the worst years. Kozak noted that dairy farmers have been concerned about the issue of the margin between prices and inputs for a number of years and had launched an effort to cull cows through his organization.

The dairy market stabilization program would not be in danger of violating World Trade Organization standards, he said, because the program would use excess dairy supplies for domestic feeding programs.

The International Dairy Foods Association said recently it still opposes the proposal on several grounds, but Kozak said that the voluntary nature of the program should satisfy IDFA’s concerns and that the processors’ group “should declare victory” and support the bill.

While Peterson has introduced the measure in the House, it would be up to House Agriculture Committee Chairman Frank Lucas, R-Okla., to decide to bring it up for a vote in the committee. Lucas has said he wants all segments of the industry including the processors to be in agreement if he is going to move a dairy bill in advance of the farm bill

Kozak said he thinks the bipartisan nature of the support and the increasing number of cosponsors will help Lucas “determine what he wants to do with it.”

A Peterson spokesman said six House members had joined Peterson and Simpson as co-sponsors. The new cosponsors are Rep. Jim Costa, D-Calif.; Rep. Joe Courtney, D-Conn.; Rep. Rick Larsen, D-Wash.; Rep. Billy Long, R-Mo.; Rep. Kurt Schrader, D-Ore.; and Rep. Peter Welch, D-Vt.

In a call to reporters Sept. 23, Peterson would make no prediction on whether Congress would take up the measure this year or wait until next year. He did say that he and his staff are working to be ready for the writing of a farm bill if it has to take place on short notice as part of the congressional supercommittee’s effort to reduce the deficit. The 2008 farm bill expires Sept. 30.

“We are doing some homework in case that eventuality comes up,” Peterson said of the possibility the bill make be written in the deficit reduction process. “We have no idea how this is going to work,” he added.

Avoiding another crisis

Peterson said he is open to further changes based on other members’ concerns because he wants to get the measure passed before there is a crisis in the dairy industry such as the one the one in 2009.

“If we have another crisis like we had in 2009, when milk prices dropped and input costs skyrocketed, I fear we could lose half our dairies,” Peterson said.

The dairy safety net did not work then and it won’t work if similar events occur now, he said, noting that producers cannot wait for another crisis or a new farm bill for Congress to fix the broken dairy safety net.

Peterson signaled Sept 23 that he has lost patience with the IDFA, the processors group which said it would oppose the measure on the grounds that it would create a supply management system that would raise prices to its members.

Peterson said IDFA members are “protected by the make allowance,” a provision in the current program, and “guaranteed a profit by the government.”

The proposal, Peterson said, makes the dairy program more market-oriented, which has been an IDFA goal for years.

“They’re coming up with other kinds of bogeymen,” Peterson said, adding that he does not have a lot of sympathy for “nonsense.”

Peterson also warned dairy farmer groups that have criticized National Milk’s proposal that they should find a way to work with this bill or find themselves in a situation with a crisis and no protection. The bill would end the milk income loss contract program, which some producers and members of Congress have vowed to keep, but Peterson noted that benefits under the MILC program already are scheduled to go down.

“I’ve told groups that are holding out that they are playing with fire here,” Peterson said. “If they screw this thing up, keep this from happening, they own their own.”

“It is very easy to make something not happen in this Congress,” he added.

Recalling that the pork industry got into trouble in 1999 and got a bailout, Peterson said, “Back then, there was money to do something. Right now we’re broke. I guarantee there will be no help from Congress if the dairy industry gets into trouble. We can’t even pass a FEMA bill.”

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