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Debate continues over milk-supply management proposal

Carol Ryan Dumas

Capital Press

Debate over milk-supply management in a new farm bill continues during the Thanksgiving break in congressional negotiations. Proponents of supply management point out the Senate's proposal containing supply management would cost the government $116 million less over 10 years than the House proposal, which doesn't contain supply management. Opponents say that doesn't represent all the financial and social impacts of supply management.

The National Milk Producers Federation (NMPF) continues to make its case for milk-supply management in the Senate’s farm bill proposal for dairy policy.

NMFP released a congressional cost analysis last week showing the Senate’s proposal would cost $116 million less over 10 years than the House’s proposal, which does not contain milk-supply management.

Both proposals contain margin insurance to offset low margins caused by high input costs.

The sticking point has been the milk-supply, or stabilization, component, which would kick in when margins fall below $6 or $5 for two consecutive months, or $4 for one month.

During those periods, producers would be paid only for between 92 and 94 percent of their milk to discourage production.

The House farm bill’s dairy title is projected to cost $418 million above the budget baseline over the next 10 years, according to the Congressional Research Service report released in October, while the Senate dairy program would cost $302 million above the baseline.

The CRS report buttresses the point that NMPF has been making about the need to couple margin insurance with a market stabilization program, as the Senate bill does, to achieve cost controls, incoming NMPF President and CEO Jim Mulhern stated in NMFP’s press release.

Mulhern said the CRS report demonstrates that the Senate plan is the most fiscally responsible program.

“Without the market stabilization program to both reduce the duration of low margin conditions, and reduce government outlays for insurance payments, the House plan would be a budget-buster,” he said.

The International Dairy Foods Association contends milk-supply management would harm consumers and low-income people needing nutrition assistance by raising the cost of milk.

Jerry Slominski, IDFA senior vice president for legislative affairs and economic policy, said NMPF is hiding those impacts comparing only the government costs of the two proposals.

While the Senate proposal would cost the government a bit less at face value, it would cost the government more in the long run in higher costs of some nutrition assistance programs if the cost of milk increases due to supply management, he said. 

For the same reason, it would also negatively affect people in the Supplemental Nutrition Assistance Program (SNAP) because their “food stamps” wouldn’t stretch as far when it comes to milk and dairy products.

He contends the costs of the two bills are not much different, especially when one considers the Senate bill includes $50 million in fees paid by dairy farmers over the10 years. That makes up close to half of the difference, he said.

In addition, milk-supply management would have indirect costs to the government, which would be much higher than the difference between the bills. The government buys dairy products and subsidizes their purchase through some nutrition-assistance programs. Those costs would increase during periods when supply management increases the price of milk — as much as 35 cents per gallon, he said.

“Claims about a 35-cent-per-gallon increase are bogus,” said Chris Galen, NMPF senior vice president of communications, said any suggestion that it will spike retail prices to abnormally high levels is a deceitful and deliberate misinterpretation of the studies done on the Senate’s proposal.

Nor would it affect the milk bought through government food-assistance programs, he said.

An analysis of the Senate’s proposal by University of Missouri ag economist Scott Brown found the stabilization element would have been activated for only four months from 2009 to 2012 and would have no noticeable impact on consumer prices.

The study found the stabilization program would only raise the farm price of milk by one half of one cent per year over the four years studied That slight difference is indistinguishable from the normal movement of milk prices, Galen said.

But that’s on an average over time, and that’s not the way the program works, Slominski said.

The program is designed to trigger on and off, but there would be a spike in prices in the months it was in play, he said.

“Most months stabilization is not in effect so it has no impact, which is why the IDFA rhetoric is misleading,” Galen said.



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