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Mr. Chairman, The Dairy Security Act is a good place to start

PD Staff Published on 18 May 2012

On April 26, Rep. Thomas J. Rooney, chairman of the House Agriculture Committee’s Subcommittee on Livestock, Dairy and Poultry, held a hearing on reforming dairy programs in the 2012 Farm Bill. This is the third of eight hearings which are gathering agricultural leaders in Washington to share their perspective on farm policy.

Witnesses discussed problems with current dairy programs and provided feedback on proposals being considered to address those inadequacies. Dr. Scott Brown, assistant research professor at the University of Missouri, provided economic analysis of policies under discussion. Other witnesses shared their perspectives on the potential impacts of dairy reform.

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Here are excerpts of testimony presented during the hearing.

“At our dairy audit hearing last fall, we got a sense for the inadequacy of some of our current dairy programs. We know that innovative ideas are needed in order to ensure our programs support our producers, facilitate product and market development, and continue to maintain the availability of safe, abundant and affordable product for our consumers.

While consensus is building around some of the proposed reforms to dairy programs that we can implement in the Farm Bill, today’s hearing focused on some controversial elements, and that’s why it was critical for us to receive the economic analysis that we did in order to gain an understanding about how these new recommendations would work and what their impacts would be.”
Chairman Thomas J. Rooney
R-Florida

“While we are opposed to the continuation of the Dairy Product Price Support Program, MILC and the Dairy Export Incentive Program (DEIP), we do support fiscally responsible dairy programs such as Federal Milk Marketing Orders and a margin protection program that is both dairy producer and federal budget friendly.

“Southeast Milk has consistently opposed supply management for two reasons. First, the Southeast as a region is milk-deficit, so supply management makes no sense. Second, milk production in the Southeast has a large seasonal swing compared to the rest of the country, so distortions caused by supply management could be exaggerated in the Southeast depending on the time of year restrictions are triggered …

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However, we should acknowledge that as a result of a continuous process to improve the Dairy Security Act, there are a couple of changes that have made the legislation more palatable to us.”
Patrick Joseph “Joe” Wright, V&W Farms, Inc.
on behalf of Southeast Milk, Inc., Avon Park, Florida

“The proposal does continue to evolve as the Congress moves ahead on consideration of the next Farm Bill. I am happy to express my support for those changes and would like to offer up another. This change would recognize the fact that feed costs are different in the areas of the country where most of the milk is produced than in the areas of the country where most of the feed is produced.

It would be helpful for dairy farmers everywhere to have the option of choosing a market-based margin plan that values feed where it is used rather than a production-based plan that prices it where it is grown.”
Tom Barcellos, Western United Dairymen
WUD board president and dairyman in Porterville, California

“As policy makers, we must be sensitive to the different geographical challenges and work to craft a consensus package that meets the needs of most, if not all. It is extremely important that facts and data drive the discussion as we work to craft a solution that will smooth out the roller coaster of highs and lows.”
Ranking Member Dennis A. Cardoza
D-California

“Every component of the proposed dairy program hinges on the margin defined by the program. It is important to understand the construction of the Dairy Security Act of 2011 margin and how it has moved historically.”
Dr. Scott Brown
Assistant research professor, Integrated Policy Group, Division of Applied Social Sciences, College of Agriculture, Food and Natural Resources, University of Missouri

“Dairy policy reform should not include a supply management program which purports to help dairy farmers but places a heavy burden on dairy product consumers in a year like 2009 when they were also in need. Dairy producers should have catastrophic margin insurance and other risk management tools available to them to be ready for the next downturn in milk prices and an increase in feed costs.

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“IDFA believes it is time to decrease regulations in a highly regulated industry. We support policy initiatives that will help the industry grow, not only through increased consumption and product innovation here in the U.S., but by taking advantage of new and growing export opportunities.”
Jon Davis, chief executive officer
Davisco Foods International, Inc., on behalf of International Dairy Foods Association, Le Sueur, Minnesota

“The Dairy Security Act changes the status quo by eliminating the current ineffective government dairy programs and provides participating dairy farmers with a much better safety net, while reducing spending on dairy programs by precious millions of dollars in the dairy baseline.

“It treats all farmers in all regions equally. It does not raise consumer prices nor negatively impact exports, while addressing the wild price swings that have plagued producers and processors in the past. It allows an orderly transition to a new era whereby dairy farmers manage their risks and creates a solid safety net for farmers.”
Jerry Kozak, president and chief executive officer
National Milk Producers Federation, Arlington, Virginia

“The Federal Milk Marketing Order system needs to be phased out. The rigid, complex formulas used to determine minimum milk prices are the source of a long list of egregious problems, such as keeping fluid milk prices artificially high and discouraging innovation in dairy ingredients that are not recognized in the government’s price formulas. If our industry was freed from these artificial formulas to respond to consumer demand, we would be more competitive.”
Jon Davis, chief executive officer
Davisco Foods International, Inc., on behalf of International Dairy Foods Association, Le Sueur, Minnesota

“Recent events in California raise another issue that must be discussed as the Farm Bill moves forward. Voluntary production cutbacks undertaken by cooperatives like mine due to processing capacity constraints must not be held against producers in a safety net that uses a production history, as does the Dairy Security Act.

The basic margin plan allows the highest of the last three years’ production to be the base, while the supplemental plan relies on the most recent year’s volume only. That could be a major impediment to California producers’ participation in the program if this issue goes unaddressed.”
Tom Barcellos, board president
Western United Dairymen, Porterville, California

“This recent cycle of record high and low milk receipt changes has left the industry searching for mechanisms to help stabilize producer finances. The volatility dairy producers have experienced in the last few years often made what appeared to be good financial decisions turn into tough financial results when the markets for feed and milk products moved so quickly.”
Dr. Scott Brown, assistant research professor
Integrated Policy Group, Division of Applied Social Sciences, College of Agriculture, Food and Natural Resources, University of Missouri PD

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