The Senate Agriculture Committee approved a farm bill draft on Thursday that contains provisions hailed by some dairy groups and criticized by others. The bill will now proceed to the full Senate for consideration.

The Senate legislation includes a new, voluntary margin protection program, endorsed by the National Milk Producers Federation (NMPF), to safeguard farmers against disastrously low margins, such as those generated by the low milk prices and high feed costs that cost dairy farmers $20 billion in net worth between 2007 and 2009.

"The Senate has taken a huge step in the right direction by including the dairy reforms modeled after NMPF's Foundation for the Future program," said Jerry Kozak, President and CEO of NMPF.  

Kozak said the dairy title contains a better safety net for farmers in the form of the Dairy Production Margin Protection Program, which offers them a basic level of coverage against low margins, as well as a supplemental insurance plan offering higher levels of protection jointly funded by government and farmers. Those who opt to enroll in the margin program will also be subject to the market stabilization program that asks them to reduce milk output when margins are poor.

Meanwhile, the International Dairy Foods Association, which represents dairy processors, expressed disappointment over the developments.

IDFA had backed an alternative margin insurance program proposed by Sen. Michael Bennet (D.Colo.). Bennet’s proposal did not have a dairy supply management program attached to it like the one that ultimately passed in the Senate Ag Committee. IDFA is opposed to measures that would restrict the supply of milk to processors.

According to Jerry Slominski, senior vice president for legislative and economic affairs for the IDFA, Bennet’s proposal would have offered dairy farmers “the ability to manage price volatility without including a failed policy that discourages investments by dairy food companies and takes away opportunities for dairy farmers to expand production."

It should be noted, however, that the supply-management feature included in the Senate Ag Committee legislation -- the Market Stabilization program -- would only kick in during certain times, such as depressed margins similar to what occurred in 2009.

The Senate Ag Committee approved two amendments to the dairy title of the farm bill:  one, offered by Sens. Johanns (R-Neb.) and Casey (D-Pa.), that authorizes a review of the Market Stabilization program at the end of the five-year farm bill lifespan; and a second, offered by Sen. Gillibrand (D-N.Y.), that extends the MILC program through June 2013, at a reduced rate, so there is a safety net in place while the USDA implements the new dairy margin insurance program. The bill was not amended in any way that diminishes the value of the margin protection or market stabilization elements, according to Kozak.

"We're very appreciative that members of the Agriculture Committee have preserved the carefully-crafted economic and political compromises that went into the creation of Foundation for the Future. We look forward to working with the full Senate as it considers this legislation later this spring," Kozak said.