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Analysts: Dairy proposals comparable

Published on April 25, 2013 3:01AM

Last changed on May 23, 2013 8:50AM

Carol Ryan Dumas/Capital Press
Dairy cattle line up at the feed bunker at West Point Farms, Wendell, Idaho, on March 29. Corn in the ration is a big expense at the dairy at more than $2 per cow per day.

Carol Ryan Dumas/Capital Press Dairy cattle line up at the feed bunker at West Point Farms, Wendell, Idaho, on March 29. Corn in the ration is a big expense at the dairy at more than $2 per cow per day.

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Capital Press

Authors of a new analysis comparing the Dairy Security Act and the Goodlatte-Scott amendment say neither proposal trumps the other and both would offer effective protection against catastrophic loss.

But dairy groups lobbying for their preferred proposal to overhaul federal dairy policy contend the analysis demonstrates the advantages of their bill and the shortcomings of the other.

Both proposals offer subsidized margin insurance for income over feed costs, and the industry is generally supportive of that concept. The difference, and the sticking point, is that DSA contains a voluntary milk-supply-management plan, called the Dairy Market Stabilization Program, and the G-S amendment does not.

National Milk Producers Federation supports DSA, and the International Dairy Foods Association staunchly opposing the proposal and supporting the G-S amendment. Both followed this week's release of the report, by six economists, with press releases pointing out the merits of their preferred proposal and the faults of the other.

One of the analysts said he is not surprised at the political ping-pong over the paper, which reports on the economists' analysis to date. The paper was written to address a lot of different interpretations and spin on most anything the analysis group has said.

"I suspect what we were really trying to say lies between what National Milk has said and what IDFA has said," said Mark Stephenson, director of dairy policy analysis at the University of Wisconsin.

The economists took an analytical look at the short-term effects of each proposal and found both would provide effective catastrophic risk protection for dairy farms. DSA removed 66.6 percent of catastrophic risks, and G-S removed 71.2 percent, he said.

Under any scenario, both programs would provide better outcomes for farmers than without the programs, with supplemental insurance above the subsidized insurance providing a positive expected benefit.

Neither proposal is better than the other, and there are pluses and minuses to each, the found. While the sticking point is supply management, both could potentially limit or encourage production growth, he said.

DSA could limit growth through temporary penalties on milk produced over a base amount, and G-S could limit growth because insurance protection is limited to base production over the life of the program.

That said, farmers could purchase private insurance for the growth limited by G-S, and the penalty for growth under DSA is not heavy enough to deter anyone who is determined to grow, he said.

In general, the authors also say because the insurance program is generous and the penalty for growth is not severe, it could bring a positive milk production response. If a program is successful in taking risk out of the business, it could free up money farmers might otherwise hang onto for the down times for investment in increased milk production, he said.

Which proposal is better really depends a good deal on the individual farmer, he said. One who is fairly stable in milk production might prefer G-S because he doesn't plan to grow anyway. Another with intentions of growing dramatically might feel G-S won't give him the protection he needs, he said.

The study looked at the effects of the proposals on one model farm with ordinary growth and did not address long-term impacts on milk supply, dairy exports or the liquidity of private dairy risk markets.


"Goodlatte-Scott vs. the Dairy Security Act" can be found at www.nmfp.org


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