Posted: Thursday, September 15, 2011 11:00 AM
Courtesy of National Milk Producers Foundation
NMPF President and CEO Jerry Kozak, left, discusses dairy policy with Rep. Tom Rooney, R-Fla., chairman of the House Agriculture Subcommittee on Livestock, Dairy and Poultry.
Lawmakers stress need for better safety net for producers
Congressmen attending a House Agriculture Livestock, Poultry and Dairy Subcommittee hearing on federal dairy policy said they're concerned about the nation's dairy producers and questioned USDA officials on the effectiveness of current programs.
High feed costs and low milk prices crippled the industry in 2009, and "revealed the inadequacies of current dairy policy" and the need for an improved safety net for producers and to ensure safe, affordable products for consumers, said Subcommittee Chairman Tom Rooney, R-Fla.
"It is vital that USDA keep the industry strong," he said.
Hearing witnesses included a USDA dairy economist and officials from the Farm Service Agency and Agriculture Marketing Service.
Congressmen asked about the effectiveness of specific programs, but USDA officials replied with overall participation numbers or funding outlay and, for the most part, weren't able to quantify effectiveness.
Much discussion focused on the Dairy Product Price Support Program, which amounts to government purchases when the price of cheese, butter or nonfat dry milk drops to a trigger point.
Rep. Michael Conaway, R-Texas, said world distribution and demand has changed since dairy policy was formulated in the 1930s and questioned whether the price support is paying to produce products the world doesn't want any more.
Many have argued the program caused the production of nonfat dry milk to increase more than it should have, said Larry Salathe, USDA economist. But that incentive is probably being reduced as processors move to more value-added products, such as whey.
But has the program hindered development of innovative products, asked Rep. Tim Huelskamp, R-Kans.
"I haven't seen any quantitative effects (but) concerns have been raised by a variety of people, and (they are) probably legitimate concerns," Salathe said.
Rep. Peter Welch, D-Vt., asked if the program hinders exports.
The U.S. is competitive in the world market, and government purchases stabilize product prices in the U.S. and abroad, Salathe said.
"But (the program) probably does undercut exports," he said. "No matter how you intervene in the market, there are positive and negative implications."
Congressmen also questioned the effectiveness of Milk Income Loss Contracts, which subsidize producers when the Class I price in Boston falls below $16.94 per hundredweight and includes a feed adjuster.
Because of its 2.985 million-pound cap, MILC has been viewed as not much help to any but the small producers.
"MILC is a prime example of government programs that pick between winners and losers," said Ranking Member Dennis Cardoza, D-Calif.
Rep. Jim Costa, D-Calif., noted that the trend in the industry is toward larger dairies and wanted to know how effective the program was during the recent crisis.
The program paid out $940 million in 2009, but 3 percent of dairymen went out of business, said Juan Garcia, FSA acting deputy administrator of farm programs. "Obviously, MILC is not a very effective safety net," Costa said.