Dairy could be in the most danger from Farm Bill impasse

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With the Farm Bill hung up in the U.S. House of Representatives, a prominent member of the House Agriculture Committee says the dairy industry could be especially vulnerable to the impasse.

“Dairy is the one segment of agriculture that is in the most jeopardy and the most danger because we have a program that doesn't work right now," Rep. Collin Peterson (D-Minn.), ranking member of the House Ag Committee, told an AgriTalk Radio audience on Thursday.

Federal dairy policy dates back to the 1930s, and there is a growing consensus that the system is broken and needs to be fixed. This year’s drought has exacerbated the problem with rapidly rising feed costs.

“If we have this new margin insurance system in place (as called for in the dairy provision of the Farm Bill), it would basically make the feed cost increases less of a problem,” Peterson said. “It insulates the dairy industry from these gyrations, not only in prices of milk but also in prices of feed. Without it, I think dairy has got some very tough time ahead,” he added.

While most everyone in the dairy industry can agree on insuring the margin between milk price and feed cost, there are some who object to the “margin stabilization” component that is attached to the legislation. It would discourage producers from increasing milk production in times of tight profit margins.

“We have a 90 percent consensus in the dairy industry on the dairy provisions (that have passed in the U.S. Senate and the House Ag Committee),” Peterson says. “That’s about as good as you can get in dairy,” he says, adding he is confident the dairy portion will “hold together” and be in the final Farm Bill.

However, getting the Farm Bill to the floor of the House has been a problem. The House leadership has been holding it up, and some say it is a reluctance to discuss proposed cuts to the Food Stamp program that has Republicans leery going into this fall’s election. Nutrition programs make up about 80 percent of the Farm Bill.

But Peterson says there is some disagreement among Republicans, as well, regarding “the commodity title and crop insurance.”

Peterson says he would like to see a new Farm Bill passed by Sept. 30.

“We’re using August here to see if we can narrow the differences and get language written... so that when we get back (on Sept. 10), if there is a motivation to move this thing, we're in a postion to do it," he says. "We're trying, we're pushing."

Perhaps if enough congressmen “get an earful” from constituents while back in their districts this month, there will be added pressure to get something done on the Farm Bill, he points out.



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WI  |  August, 16, 2012 at 09:56 PM

What is margin stabilization? I do not think there is 90% agreement on this bill. I know most dairymen in my area do not support this bill. NMPF and its head clown Jerry Kozak support this but when was the last time they really did something to actually help the farmers they are supposed to represent. The only people who support this are the big dairy coops. I have talked to my representatives and told them I do not support this and there comments were that is what they were told by other dairy producers, but yet the big dairy coops and NMPF say they have industry wide support. Everyone please state your opinion and ask you milk coop what there view is.

thomas monteith    
mass.  |  August, 17, 2012 at 08:32 AM

the DSA is totally written for the processor benefit-auto-matic energy adjuster-no provisions for increased cost recovery for the dairy producer. My feeling is that DSA stands for DEATH SENTENCE ACTIVATED!!

OH  |  August, 17, 2012 at 09:20 AM

If the DSA is "written for the processor benefit" then why does the IDFA oppose it?

August, 17, 2012 at 09:38 AM

Excellent point, Ron. Independent studies show DSA is good for all dairy farmers.

August, 17, 2012 at 09:45 AM

Excellent point, Ron. Independent studies show DSA is helps for all dairy farmers of all sizes. And, every farmer, like Steve, has a choice - they are not required to take the protection DSA provides when times are tough like now and, therefore, not have to abide by the requirements of the market stabilization program. There is no free lunch.

IN  |  August, 17, 2012 at 09:58 AM

If the House would move to adopt the bipartisan Goodlatte/Scott amendment then it would be a workable margin insurance system.It doesn't requires supply management and the CBO has scored it less costly than the current Peterson bill. Then we need to start marketing the products the world wants including Whole Milk Powder, more Skim Milk Powder and MPC's and eliminate the outdated Non-Faty Dry milk.

PA  |  August, 17, 2012 at 10:17 AM

I think some of the exceptionally large dairy operations (and thus those with the most influence) LIKE low milk prices because it means their competition will be out of business and they can buy their operation at a reduced cost. Processors like it because the "inefficient" farms are out and they can get their milk more cheaply.

CA  |  August, 17, 2012 at 10:46 AM

The Goodlatte/Scott admendment(bought and paid for by IDFA) would only be less costly if corn was below $6 and Class 3 Milk over $17 causing no incurring of the insurance payouts. On the other hand, if the admendment was to be applied then the insurance premiums would have to float and costs to dairymen would increase. Question, what cost to export are you willing to cover? Or is it someone elses risk?

MI  |  August, 17, 2012 at 10:57 AM

CD- Get out of your small farm bubble that the world is out to get you. Who likes low prices? I know of many large dairies and can't say that one of them is happy or making ends meet with the current prices..It's easy to pass the blame and speculation and use it as an excuse to bash the dairies that have chosen to expand- it gets used to fuel any topic it seems. And I'm tired of this argument.... My husband and I milk 100 cows and I have managed a large dairy for years. (In fact, if I had the money to expand, I would!) So I get to see both worlds. THERE IS NOTHING WRONG WITH EITHER SITUATION- except for peoples attitudes and judgements which need a definite adjustment. What happened to Loving Your Neighbor?? In the meantime, pull up your boot straps and say a prayer or two.

Wisconsin  |  August, 17, 2012 at 11:14 AM

The dairy provision of this bill will put farms that that participate out of business-- this is not an "might" in todays markets-- it is a "will". The provision would have kicked in in May requiring a 2% reduction in production and would have increased to 4% in July only because feed costs have reduced margins. Do we need less milk now? No- the market is clearing the milk. If we reduce production we risk being an undependible supplier for all markets not just export. The program is destined to fail because dairies like ours (4 families with 700 cows) will not participate because we use other tools to protect income and expenses (forward sales, input purchases etc). Other larger farms have the same opinion. We can do a better job of protecting than any gov. program. If half of the milk is not in the program those in it will need to reduce twice as much to get the desired outcome. When our prices increase imports increase to fill the gap. How fast will margins turn around when costs are the problem, part of the milk is not enrolled and imports are more than willing to take out markets?? How do you cut back? Sell cows? Compromise lactations by cutting feed? Run up costs by carrying early dry off cows? How do you cut back temporarily without reducing your ability to get back in the game when the manditory reduction ends if you have compromised lactations or culled your production units?? Ask you banker how they will cooperate if you have the double wammy of margin drops and then required to lower production. Ours said payments will stay the same even though gov. payments would be at least 30 days later than milkchecks would be. Try to pencil that one out!

IN  |  August, 17, 2012 at 12:34 PM

The CBO comparison actually shows that at the $6.50 margin and above the Goodlatte/Scott amendment has a premium equal to or lower than both the Senate and House bills. It gives producers the option to seek the margin or not to, so it satisfies all producer large or small. Why would we not consider it as the best option. Compare the three options at this web site http://www.dpac.net/publication_files/side-by-side-dairy.pdf

Western, NY  |  August, 17, 2012 at 01:44 PM

Linda makes good points- how do you temporarily reduce production? In 2009 we went from 3x to 2x... but I cant think of much to do without cannibalizing the operation. Why is it only the farmer who balances the supply- 100% of the milk will still be processed. The Processor will still get their make allowance for every drop. The store will still sell everything that is made. So only the farmer gets to balance the market- What if China does increase their herd- then New Zealand is dumping their milk on the world market- so depresses prices and gluts up our exports. Now we get to balance WORLD supply. This plan stinks- I am not saying we don't need change- but when all the Co-ops and Processors like it...the farmer should be worried. Remember- when you sit down at a poker table and don't see the sucker- its probably you.

CA.  |  August, 17, 2012 at 02:14 PM

What we need is high milk standard, like here in California and get rid of supply. And then put a floating cap on production. Then get the Goverment out of the dairy buss all together. Plus it won't cost the tax payer anything. But knowing the goverment they will f--- that up!!

Pa  |  August, 18, 2012 at 06:00 AM

The best thing that could happen is get the government out of our industry totally. Anytime the government has their fingers in the pie things get screwed up and the people its supposed to help get the short end of the stick. Besides our gov is so upside down financely that if they don't soon get their house in order they are going to go down the tubes like our european neighbors. So I don't beleive any bill that does get passed should have any measure funded by uncle sam. Whatever happened to good ole american private enterprise unimpeded by the gov. Surely we dairymen can keep our own house in order.

Stephen Brown    
August, 18, 2012 at 08:16 AM

Peterson needs to stop playing regional politics and twisting numbers to match his truth. 90% of dairymen believe in the concepts of the dairy title, but not the title as it is written. Or maybe he was counting the dairymen in his district. If you dairy in the East, West or South you should tell your Congressman this dairy title doesn't work. It is upper Midwest centric at the detriment of others. Perimeter states receive a fraction of real margin insurance because feed costs aren't fairly represented for the region. But the perimeter states FULLY participate in production constraints. Less REAL margin protection and full rate production cuts equate to a lifetime of slow bleed from the perimeter states to the Midwest. The current Dairy Title in the Farm Bill is bad policy! Unless you dairy in the Midwest, Peterson's district.

Mn  |  August, 18, 2012 at 07:25 PM

Minnesota Milk Producers Association does not support the dairy bill. They have told Peterson this but he refuses to listen. He needs to be replaced ASAP. I would like to know who all the dairymen are that support this in mn. I have met very few.

TN  |  August, 22, 2012 at 02:40 PM

200 billion pounds of milk (US production rounded up) with a safety net of 50 million gets you 2.5 cents per hundred weight to manage risk of a milk price and feed price, That want even pay broker fees. This Bill is an attempt by some dairy farmers cooperatives to be able to control production with the 2.5 cents cwt. as bate.

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