The Hagstrom Report

Agriculture News As It Happens

National Milk: CBO estimates 60 percent participation in dairy reform bill's market stabilization option

While a key element in the dairy reform bill would be voluntary, the Congressional Budget Office has estimated that the producers of at least 60 percent of the nation’s milk would sign up for it, National Milk Producers Federation President Jerry Kozak said today.

In a call to reporters, Kozak said CBO has estimated the bill would save $167 million over the first five years, but only $131 million over 10 years while continuing current programs would cost the government $672 million.

Kozak said CBO’s reasoning behind higher savings in the first five years was the elimination of the milk income loss contract program, the dairy export incentives program and milk price supports.

He also said it is harder for CBO to calculate savings and expenditures in the second five years of its program estimates. Kozak said he believes the 20 percent savings over 10 years would attract the support of members who do not have much dairy production in their states, but want to reduce the federal deficit.

The draft written by House Agriculture Committee ranking member Collin Peterson, D-Minn., made participation in the dairy market stabilization program mandatory, but after some dairy farmers told National Milk officials during a series of meetings this summer that they did not want participate, National Milk made the participation optional.

The bill that Peterson and Rep. Mike Simpson, R-Idaho, introduced on Friday made the program optional but said that if dairy farmers want protection against the margin between dairy prices and input costs they will have to participate in the market stabilization program, which would put some restrictions on their ability to produce milk when prices are low. Peterson and Kozak have both said that lenders will put pressure on the dairy farmers to participate in the program.

The bill has not been introduced in the Senate yet, but Kozak said he is “optimistic” that a senator will come forward to do so. Sens. Kristen Gillibrand, D-N.Y., and Amy Klobuchar, D-Minn., have said they want to save at least some of the elements of the MILC program, but Kozak said he believes that Gillibrand’s and Klobuchar’s serious interest in dairy policy will lead them to consider the bill.

Kozak said he is concerned about the prospect that milk prices will go down next year while feed prices stay up, as they did in 2009, but that the proposal is not written in reaction to the conditions in the worst years. Kozak noted that dairy farmers have been concerned about the issue of the margin between prices and inputs for a number of years and had launched an effort to cull cows through his organization.

The dairy market stabilization program would not be in danger of violating World Trade Organization standards, he said, because the program would use excess dairy supplies for domestic feeding programs.

The International Dairy Foods Association said last week that it still opposes the proposal on several grounds, but Kozak said that the voluntary nature of the program should satisfy IDFA’s concerns and that the processors’ group “should declare victory” and support the bill.

While Peterson has introduced the measure in the House, it would be up to House Agriculture Committee Chairman Frank Lucas, R-Okla., to decide to bring it up for a vote in the committee. Lucas has said he wants all segments of the industry including the processors to be in agreement if he is going to move a dairy bill in advance of the farm bill

Kozak said he believes the bipartisan nature of the support and the increasing number of cosponsors will help Lucas “determine what he wants to do with it.”

A Peterson spokesman said today that six House members had joined Peterson and Simpson as co-sponsors on Friday. The new cosponsors are:
  • Rep. Jim Costa, D-Calif.
  • Rep. Joe Courtney, D-Conn.
  • Rep. Rick Larsen, D-Wash.
  • Rep. Billy Long, R-Mo.
  • Rep. Kurt Schrader, D-Ore.
  • Rep. Peter Welch, D-Vt.