Boehner’s ‘Soviet-style dairy program’ comment draws response

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Things could get interesting for dairy policy once the House Agriculture Committee version of the Farm Bill makes it to the House floor.

House Speaker John Boehner (R-Ohio) is on record as saying “we have a Soviet-style dairy program in America today, and one of the proposals in the Farm Bill would actually make it worse.”

The reference apparently was to a "market stabilization" provision that would encourage dairy farmers to limit production increases in times of tight profit margins.

"The thing that's a point of contention is this stabilization fund," U.S. Representative Collin Peterson (D-Minn.), ranking member of the House Ag Committee, acknowledged to AgriTalk Radio on Tuesday.

Peterson also gave some insight into Boehner and his experience with dairy policy decisions.

"John hates the dairy program," Peterson said. "He was on the (House Ag) Committee for 16 years, and his main focus then was to get rid of the dairy program," he added. "Speaker Boehner is never going to be happy unless we get rid of the whole program."

Peterson defended the dairy policies in the House Ag Committee version of the Farm Bill, saying they are are "very reform-minded" and "100 times better than what we've got now."

Chris Galen, senior vice president of communications at the National Milk Producers Federation, says the challenge ahead is to show Boehner and others that the reforms in the House Ag Committee version of the Farm Bill are indeed improvements to current dairy policy. 

Ending the role of government as a buyer of surplus dairy products and ending direct payments to farmers do make the system more market-oriented and save the taxpayers money, Galen told an AgriTalk Radio audience on Monday.

“Anything we can point out that saves the government money and saves the taxpayers money ― that’s something I think the leadership in the House has to take seriously,” he said.

Philosophically, the reforms sought by the National Milk Producers Federation, which are in the House Ag Committee and Senate versions of the Farm Bill, are a more self-reliant approach, he adds.

“If you want help from the government in terms of this margin insurance, then you have to offer to be part of the solution by trimming your production when conditions are really bad to help bring supply and demand back into balance,” Galen said. “If you’re not willing to do that, then why should you be there accepting help from the government?”

The insurance Galen is referring to would kick in and provide payments to farmers when the margin between the feed price and the milk price tightens to a certain level ― again, indicative of tough economic times. It would be a voluntary program, but in order to accept the insurance payments, a producer would have to agree to participate in “market stabilization,” which is the supply-management provision that Speaker Boehner is referring to.

“I don’t think anybody involved in milk production here in the U.S. really would know what it would be like to be a Soviet-era farmer from 20-plus years ago,” Galen said in reference to Boehner’s earlier comment.

It’s unknown if the House Ag Committee’s version of the Farm Bill will come up for discussion prior to the August recess.

On the same AgriTalk program on Monday, House Ag Committee Chairman Frank Lucas (R-Okla.) said there are a number of other issues on the agenda for the remainder of July. But it remains his desire to get the bill out on the floor of the House as soon as possible.

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Jackie Schmidts    
Lake Placid, NY  |  July, 17, 2012 at 03:14 PM

Finally an elected official (Boehner) that really gets it and isn't afraid to say something. "Ending the role of government as a buyer of surplus dairy products and ending direct payments to farmers do make the system more market-oriented and save the taxpayers money, Galen told an AgriTalk radio audience on Monday. Well Mr. Galen this isn't more a more market oriented policy, this is simply a little less government intervention. What you are replacing is not market oriented. Let's start with what you call market stabilization that you want in the Farm Bill. When this portion of the law has to kick in is when we need more market oriented policies, not one that restricts supply. If the market price is low for producers we don't need as much supply. The problem is that your solution in the Farm Bill is anti-market orientation. Less supply should come from less producers, not punishing by fining those dairy farmers that are more efficient. And by the way, if you are successful in getting these new dairy policies enacted, what will you do with the surplus products under "market stabilization", you'll give the product away. This is not more market oriented, it will only displace other product maufacturers and distributors are trying to sell, unfairly competing with them. No, I don't think guaranteeing someone in the pipeline to pay for their costs of doing business(this would be your margin insurance that tax payers will food some of the bill for), holding back supply artifically(sending signals to buyers overseas we are not a consistent market oriented supplier) and then giving dairy products away that should be sold is more market oriented. Boehner is right, this is a bad system only being made worse. It should be dumped from the Farm Bill.

Christopher Galen    
Arlington, VA  |  July, 18, 2012 at 08:13 AM

Let me try to further clarify a few things: Ending the role of government as a buyer of last resort, plus ending direct payments (MILC), are both more market oriented. The margin insurance concept is more appropriate to the conditions farmers are facing today ($10 corn, anyone?). And keep in mind that you can only insure up to 90% of your feed costs...not all your feed costs, nor any of your other costs. This is a safety net, not a guarantee of never losing any money or profits as far as the eye can see. Nor does this guarantee there won't be any further exodus of dairy farms. Are you really serious that the only solution is a game of last-man standing where "less supply comes from less producers?" How much more equity are you willing to lose the next time?

OH  |  July, 18, 2012 at 08:34 AM

John Boehner is just doing what his corporate masters want him to do. He is a puppet to who gives him and his party the most money. It doesn't matter if that is the best for the country. If IDFA is against it, then it must be good for the dairyman.

pa  |  July, 18, 2012 at 12:27 PM

For Chris in Ohio, You get my vote for the most sensible comment on the whole page!

Buffalol,N.Y.  |  July, 18, 2012 at 09:19 AM

Mr. Galen is purposing what is good for the co-ops and the processor, cheep milk with money to be made for co-op's and processor's management.

Bethesda MD  |  July, 18, 2012 at 09:40 AM

Processors have all kinds of lobbying clout in DC, dairy farmers much less so. Look at the corn boys.....they want to keep the ethanol gravy train going eventhough it is neither a cost or availability solution for energy independence.

Johnny Stansell    
Abilene, Tx  |  July, 18, 2012 at 09:34 AM

Get rid of gov subsities! I have seen farmers produce crops NOT needed for years. Let the market determine what you produce. We farmers are better than a dependant class of people to the government. Remember when people refused charity? Well now we do! Something big in character lost somewhere! Johnny

WI  |  July, 18, 2012 at 01:15 PM

Thank you to all the people who are against government subsidies and the bureaucratic policy in Washington! We need to speak up more! Agriculture would thrive if it became a true free market, everyone equal, without some segments getting favored policy at the sacrifice of others. It is too easy to see the money being passed under the table. If congressmen and senators were listening to us, capitalism would thrive and handouts/government intervention would go away.

David Brand    
Indiana  |  July, 18, 2012 at 09:53 AM

Quick question: when Canada, the EU and Australia are all getting ready to end there quota/supply management schemes, why then do the people at NMPF think that imposing a quota system in the US would be a good thing? Everyone that's tried it for years now realizes its the wrong thing to do. Let capitalism work. Quit trying to punish efficient well managed dairy farmers.

TN  |  July, 18, 2012 at 09:59 AM

AS I understand at $6 over feed cost you are told to cut production , government help comes at $4 over feed cost. If you have a multiple million dollar business why put yourself in that position. The unknowing that do lock themselves in this agreement are going to be the looser, there is no relief at $4 and there is less pounds to multiply a price by. The operation that does not cut production and chooses to do risk management some other way will be the one ahead, because if the government forced cut in production increases price those with the pounds get the dollars. What happens when government forces a cut in production and then you have a year where environmental condition creates a cut back in production and harm is done to the demand side? How is this plan going to align with WTO rules? Are we going to loose export markets? Why do we want central control of our industry? If I make a mistake, I change in a hurry. If NMPF and their over paid leadership get it wrong the industry will be years crawling out from under the mess.

IL  |  July, 18, 2012 at 10:04 AM

Thank you, Mr. Boehner, for speaking the truth. Dairy farming is a business, and nobody has a "right" to continue farming, just because they were born into it. If your business model cannot survive without subsidy, you should be out of business. Your failure and subsequent liquidation may provide the opportunity for a young, beginning farmer to start out. They hypocrisy of older farmers complaining that they "can't make it" while refusing to adapt to new market realities frustrates me to no end. The same folks complaining about welfare, food stamps, etc. are the first ones with their hands out for CRP, MILC, etc.

young dairyman    
nw Illinois -  |  July, 18, 2012 at 02:15 PM

Right on jack! Nobody has a "right " to anything. The ol boys that are stuck in their ways make it more difficult to get started. Not impossible but difficult. I appreciate what progress they have made but now is the time to let the next generation get started.

Harry Stugart    
Butler,Pa.  |  July, 18, 2012 at 02:49 PM

There is a major problem with the Dairy Secutity Act that is not being discussed. The pricing of milk ( price discovery )will change to what is called a competitive pay system. I believe that when supply begins to exceed demand and the buyers bids begin to drop and the price will free fall because the cost of buying the milk can be transfered to the goverment on 80% of the milk that is in the program. This will reduce the processors cost by 100's of millions of dollars per month. The counter cyclical nature of the margin insurance payments will help to keep milk flowing and ignoring the market signals. The supply management part of this program does not really require you to reduce supply, but you just do not get paid for the 2% to 8% of your recent production. The margin insurance more than makes up for this so many dairyman will just continue to ship the extra milk in the hopes that someone else reduces production and the program triggers out. If this plays out as I suspect this program will be a very costly program.

wi  |  July, 18, 2012 at 03:53 PM

If we don't get paid on 2-8% of our production as Harry states, who gets the money and what is it used for?

MN  |  July, 18, 2012 at 04:19 PM

The US is a dairy deficit-producing country. Why on earth would we want to restrict production? Enforce FDA rules in cheese-making and there goes all of that 'surplus' milk. Stop allowing imported ingredients that do not meet food grade standards to be used in food processing and all of a sudden there is not enough supply to meet demand, nor will the capacity to produce more exist under a quota system.

Hull, IA  |  July, 18, 2012 at 06:47 PM

Call me crazy but I would much rather put my future in a free market model, than having the government intervene. The government has not proven itself effective or efficient why do milk producers think they will come up with a magic potion when it comes to dairy. I believe a free market system where supply and demand determines milk production is simply the most reliable. When we continue to keep everyone in business we simply make all dairies weaker, because of excess product on the market. Losing equity is miserable and no fun, however it does make us look at our operations closely to determine where we can save and be more efficient.

MN  |  July, 18, 2012 at 07:50 PM

If this is such a good program lets, supply management, let's have it for all other commodities. Surplus production happens from time to time in all commodities. Should we then have supply controls for corn Beans, hogs etc?

helen gatton    
SW MO  |  July, 18, 2012 at 08:40 PM

I think if we are to do away with any government help or what ever you want to call it. Let's do away with minimum wage and all the epa requirements! The cheap food policy & the balance of trade policy. Impossible. Milk is a little different if you have ever produced it you would know you have to keep putting feed into a cow till the day she is sold! You can't sell this time of the year! And if they are not fed what dept. would what to deal with that. Get real! We buy just about as much as any farmer does. better get your facts right if you think the government is going to let us make very much of a profit. How about the traders that make money messing with the markets. Try pay for the lack of milk that isn't produced in the area that is trucked in & no extra pay to increase our milk. That is federal orders. Dairy has near got much money when you look @ the budget for this next year. This has always been Republican country. Maybe this will be the end of that. Remember dairy has a short self life. The hamburger may get cheap but all the other products that you eat may not before this is over!

Alan Kozak    
Millersburg, Ohio  |  July, 19, 2012 at 06:33 AM

I have a question for Mr. Galen. If the DSA were law since say Jan 1, 2012 would it have triggered mandatory production reductions for producers that enrolled in that option? Based on futures prices will July margins be low enough to trigger cutbacks? If so what % and in which month or months will producers not be paid for what % of their production over their base?

Jon Davis    
Idaho  |  July, 20, 2012 at 11:24 PM

David Brand says it all.. nothing else needs to be said

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