Ag Policy Blog
Jerry Hagstrom DTN Political Correspondent

Monday 01/13/14

Farm Bill Conferees Struggle with Dairy Compromise

SAN ANTONIO (DTN) --- Farm bill conferees are struggling to come up with a compromise on dairy policy that would satisfy House Speaker John Boehner's objection to what he calls the supply management provision in the Senate-passed bill that is also supported by dairy farmers and House Agriculture Committee ranking member Collin Peterson.

“This is a tough situation,” a dairy farm lobbyist said in an email over the weekend. “Dairy cooperative folks are on the edge of their seats right now.”

“There is really no middle ground in devising an alternative supply management program that could serve as a compromise,” the lobbyist said.

“It is difficult to find a compromise on the supply management provision since there isn’t much you can do to change the market stabilization program [the dairy farmers' preferred term for supply management] other than shorten the number of years it is in place. It is a three-year pilot program. You either have something that will cut back on production when supplies exceed demand or you don’t.”

If there is a compromise, the lobbyist continued, it will likely be just some type of safety net only, although continuing the Milk Income Loss Contract program as is would have a much higher cost over the five-year life of the farm bill than the insurance and supply management combination.

The core of the new dairy program is margin insurance to protect dairy farmers from a big increase in production costs compared with milk prices. The market stabilization/supply management provision would discourage farmers from increasing production when prices are low, but dairy processors have objected to it and the House passed a floor amendment that eliminated the market stabilization/supply management provision.

Peterson, D-Minn., and dairy farmers have said creating the insurance program with no control on production could lead to very high government costs.

The market stabilization/supply management provision's key role in the overall policy would be to significantly shorten the time period when insurance payments would be made, the lobbyist noted.

Unlike the MILC program, the margin insurance program has no caps and without the market stabilization/supply management provision margin insurance “would be akin to having a blank check for payments over an extended period of time which would be very costly,” the lobbyist said.

“The pressure is enormous on Mr. Lucas to move the bill and I don't envy him,” the lobbyist said, referring to farm bill conference leader Rep. Frank Lucas, R-Okla., chairman of the House Agriculture Committee.

“If this impasse continues, the lead conferees will have to look for a compromise provision very quickly and in my view it would be some type of safety net as yet not clearly defined,” the lobbyist said. “The full conferees could also vote on whether to strip the stabilization provision out or leave it in place and if it stays in let the speaker decide what he wants to do with the conference report.”

“I don't believe dairy will be left twisting in the wind without anything,” the lobbyist said.

Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., said last week that congressional farm leaders needed to reach a conclusion on dairy before lawmakers return this week.

But a source at the American Farm Bureau Federation convention in San Antonio speculated that the conferees would not release the bill until after the Martin Luther King Day recess the week of Jan. 20.

Releasing the bill this week would mean it would be “hanging out there” and subject to criticism before votes could be held, the source said.

The Senate and the House will be out of session the week of Jan. 20, but return on Jan. 27.

Posted at 6:35AM CST 01/13/14 by Jerry Hagstrom
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