Peterson, Simpson introduce ‘Dairy Security Act of 2011’
Peterson has stern words for IDFA, program opponents
By Dave Natzke
U.S. House Agriculture Committee Ranking Member Collin Peterson (D-Minn.) and Rep. Mike Simpson (R-Idaho) introduced “The Dairy Security Act of 2011” on Friday, Sept. 23. The bill mirrors the National Milk Producers Federation’s (NMPF) Foundation for the Future program, including revisions approved by the NMPF board, Sept. 21.
Based on FFTF, the bill contains three major components: 1) a Dairy Producer Margin Protection Program (DPMPP); 2) a Dairy Market Stabilization Program (DMSP); and 3) reforms to the federal milk marketing order (FMMO) system. It also eliminates the Dairy Product Price Support Program, the Milk Income Loss Contract program, and the Dairy Export Incentive Program.
Peterson held a press conference prior to official introduction of the bill. He said co-sponsors from California and the Northeast had been added to the bill, with more being sought.
According to Peterson, the legislation will replace current, outdated dairy programs with new risk management tools addressing the realities of today’s dairy industry, such as rising input costs and a growing export market.
He said the bill is “the most significant change in federal dairy policy, forever, I guess.”
Peterson said he would have liked the bill to move forward before the 2012 Farm Bill, in time to be implemented before what many suggest will be a cyclical downturn for dairy prices next year. However, budget scoring delays and other issues resulted in delaying introduction. He said he was unsure whether the legislation will now move forward as a stand-alone bill, or be incorporated into the 2012 Farm Bill. He has consulted with members of the Senate Ag Committee, but no consensus has developed regarding timing.
“If we have another crisis like we had in 2009, when milk prices dropped and input costs skyrocketed, I fear we could lose half our dairies,” Peterson said. “The dairy safety net did not work then and it won’t work if similar events occur now. Producers cannot wait for another crisis or a new farm bill for Congress to fix the broken dairy safety net. Feedback from all sectors of the diverse dairy industry has been instrumental in drafting this bill and I look forward to continuing these conversations, as well as working with other members of Congress to advance dairy reform.”
Peterson had harsh words for both the International Dairy Foods Association (IDFA), the dairy processors’ organization, and a stern warning for dairy organizations opposed to the plan.
“Give me a break,” Peterson said concerning IDFA’s opposition to the plan. “A lot of those guys are protected by the make allowance, and are guaranteed a profit by the government. Some of them don’t even have to market their products because of the current system. We’re moving this to a more market-oriented system, which is what they have been asking, and now that their part of the profit isn’t protected, they’re coming up with all kinds of ‘bogeymen’ and not talking about what’s really going on. I don’t have a lot of sympathy for a lot of the nonsense they’ve come out with.”
Regarding opposition within the dairy producer family, Peterson warned the legislation may be the last, best chance for dairy reforms friendly to the dairy industry.
“In this environment in Congress, not getting anything done is a surer bet than getting anything done,” Peterson said. “I don’t believe we can afford that. A lot of the signals showing up in 2008, before the collapse in 2009, are going on again in 2011. There’s a lot of concern we’ll be going back into a situation in 2012 like we did in 2009.
“I’ll guarantee there will be no help in Congress if dairy gets in trouble,” he continued. “All these groups who want the perfect solution and are holding out are playing with fire. If they screw this thing up, and keep this from happening, they are on their own. There will be no help from Congress, and I won’t be too inclined to get excited about it, because they brought it on themselves. This is their chance.
“We are talking to the outliers ... there aren’t many of them, but they’re out there, and we’re trying to work with them,” Peterson said. “It’s very easy to make something not happen in this Congress, and in my opinion, we can’t afford it. If people screw it up and we can’t get it done, it’s on their head, not ours. The MILC program is being reduced automatically, so the protection there will go down. The $9.90/cwt price support is completely unrealistic. If people screw this up, they’re playing with fire, and they better be careful.”
In a press release, Rep. Simpson said the bill is designed to be an effective safety net.
“It’s been helpful to me to hear from Idaho’s dairy industry about changes that we can make to the dairy program to prevent another economic crisis like that the industry faced in 2009. I appreciate the cooperative spirit and contributions of the members of the dairy industry thus far and look forward to continuing this conversation as the legislation moves through the committee process. I am confident that the Dairy Security Act of 2011 will provide an effective economic safety net for the U.S. dairy industry while saving taxpayer dollars,” Simpson said.
Changes to the previously released discussion draft include:
• Participation in the stabilization program is optional. Only dairy producers that elect to participate in the margin protection program will automatically be enrolled in the stabilization program.
• The basic margin program payment rate is increased to 80%.
• Funds collected when the stabilization program is in effect would be remitted to the Commodity Credit Corporation, which would then make all of the funds available to the stabilization program board.
• The proposed reforms to the FMMO system have been redrafted to direct the Secretary of Agriculture to amend the system through a hearing process. The language specifies the areas the secretary is to amend, and requires the secretary to conduct a referendum of the proposed amendments before they can take effect.
• The Dairy Export Incentive Program is repealed.
• Annual administrative fees will be required for all basic margin protection program participants – $100 for producers marketing less than 10 million lbs. of milk; $400 for producers marketing between 10 million and 40 million lbs. of milk; and $1,000 for producers marketing more than 40 million lbs. of milk.
According to Peterson, Congressional Budget Office (CBO) budget scoring shows The Dairy Security Act of 2011 will provide federal budget savings. He said the current 10-year budget baseline for dairy programs is $672 million. The reforms will save $131 million over the 10-year period, he explained. That will help garner support as Congress wrestles with federal deficits.
Peterson expects changes to the bill will occur now that the legislation has been introduced in Congress.