IDFA: Goodlatte-Scott ‘more responsible’
Source: International Dairy Foods Association
A new study, “Goodlatte-Scott vs. the Dairy Security Act: Shared Potential, Shared Concerns and Open Questions,” shows consumers and taxpayers will bear the brunt of “bad” dairy policy, according to the International Dairy Foods Association (IDFA).
The study compares the short-term impacts for dairy farmers of two major dairy safety-net programs currently being considered by Congress: the Dairy Security Act (DSA) as proposed by Rep. Collin Peterson (D-Minn.) and an alternative proposal sponsored by Reps. Bob Goodlatte (R-Va.) and David Scott (D-Ga.). It concludes that both approaches are “effective in providing catastrophic risk insurance” for stable and growing dairy farms.
The study confirms what the Congressional Research Service has reported – the Dairy Security Act will raise milk prices and force consumers to pay more for dairy products. According to the authors, “DMSP is a supply management-type program designed to enhance milk prices … the DMSP aims to reduce the milk supply and thereby enhance milk prices by imposing income penalties on dairy farmers shipping milk over their assigned production level.”
“Goodlatte-Scott is a more responsible approach to a government-funded Farm Bill,” said Jerry Slominski, IDFA senior vice president of economic and legislative affairs. “It provides an effective safety net, according to the Congressional Budget Office, without also imposing an anti-consumer ‘growth management’ program on the dairy industry. The reality is that farmers can have effective risk management tools without the government getting involved in limiting production and forcing consumers to pay more for dairy products, a key provision of the Peterson plan.”
Rep. Peterson’s Dairy Market Stabilization Program (DMSP) is specifically designed to increase milk prices by having the government control milk supply. According to a number of economic analyses, the proposal would limit dairy industry growth, curtail dairy exports and hinder job creation. Contrary to claims by the National Milk Producers Federation (read NMPF: Report highlights DSA advantages), the new study specifically states that it does not address the impacts of the DSA on “the growth of milk supply, dairy exports and liquidity of private dairy risk markets.”
The authors also state that DMSP is designed to enhance the price of milk by both reductions in the supply of milk shipped to market and through new government spending on dairy products with new funds collected by the USDA from commercial dairy markets.
By having a more conservative subsidy on large-volume producers, Goodlatte-Scott would limit government liability. This is important because the authors express concern that a generous supplemental margin protection program may induce chronic milk oversupply. The study says that this could result in average long-term margins that are lower as a consequence of more aggressive farm expansions.
The authors conclude that:
• Both Goodlatte-Scott and DSA offer effective catastrophic risk for stable and moderately growing farms;
• DSA takes away too much risk in the aggressive growth model, promising subsidized insurance at very high levels. Goodlatte-Scott would require that very large, aggressively growing farms cover more of the increased growth through private risk insurers; and
• Goodlatte-Scott performed better than the DSA in removing more of the catastrophic risk losses (71% for Goodlatte-Scott and 66% for DSA).
The study acknowledges that the effect of DMSP on U.S. dairy exports is unclear and that the uncertainties of policy outcomes “may hamper long-term relationships with buyers of U.S. dairy products abroad.”
“Farmers who prefer not being constantly required by our government to make unpredictable adjustments in their milk production or would rather not turn over part of their milk checks to the government should reject DMSP,” said Slominski.
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The International Dairy Foods Association (IDFA), Washington, D.C., represents the nation's dairy manufacturing and marketing industries and their suppliers, with a membership of 550 companies representing a $110-billion a year industry. IDFA is composed of three constituent organizations: the Milk Industry Foundation (MIF), the National Cheese Institute (NCI) and the International Ice Cream Association (IICA). IDFA's 220 dairy processing members run more than 600 plant operations, and range from large multi-national organizations to single-plant companies. Together they represent more than 85% of the milk, cultured products, cheese and frozen desserts produced and marketed in the United States. IDFA can be found online at www.idfa.org.