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Summer 2013

Farm Bill Debate Leads to Uncertainty

As Congress heads back to work this summer there are numerous items on their agenda and one is the Farm Bill.  Last year congress extended the current bill for one year which is set to expire on September 30th.  Efforts to pass a new bill have been unsuccessful in the House and failed on June 20 by a vote of 234 to 195. In mid July the House of Representatives did pass a version of the Farm Bill that removed the food stamp and nutrition programs from the Farm Bill,  even though they were urged not to.  This move will now start a long negotiation between the House and Senate on what version of the Farm Bill will move forward. 

On July 2, a coalition of 532 farm groups—almost the entire rural establishment from farm groups to conservationists to bankers—sent House Speaker John Boehner a letter urging him to bring up the farm bill again, as soon as possible, and not to split it into two. "This important legislation supports our nation's farmers, ranchers, forest owners, food security, natural resources and wildlife habitats, rural communities, and the 16 million Americans whose jobs directly depend on the agriculture industry," wrote groups ranging from the American Farm Bureau Federation and the National Farmers Union to the American Bankers Association and the World Wildlife Fund. "We believe that splitting the nutrition title from the rest of the bill could result in neither farm nor nutrition programs passing, and urge you to move a unified farm bill forward," the coalition added.

The 2009 11.14 billion dollar water bond was to be placed on the 2010 ballot.  The Safe, Clean, Reliable Drinking Water Supply Act of 2010 would be a general obligation bond that would provide funding for water infrastructure, ecosystem restoration and other water supply projects in California. The bond would fund water improvements associated with Delta conveyance, regional funding for water-related projects, watershed and ecosystem restoration, groundwater storage and clean-up, drought relief, and water conservation. The bond was considered a comprehensive fix to California water issues

Even though the recent full version of the Farm Bill was not passed, the Goodlatte/Scott amendment, which removed the market stabilization portion of the dairy title, overwhelmingly did.  A recent study from a Cornell University professor comparing the Farm Bill Dairy Security Act (DSA) proposal with the amendment offered, finds that the DSA would be more costly than the amendment.  The study found that the currently proposed Dairy Security Act is mainly beneficial to states with larger farms.  The DSA’s proposal is basically to eliminate several elements of current dairy policy that are no longer effective for the farmer and replace these with protection programs.  According to the report, the government loss ratio (the ratio of expected payments divided by premiums) is higher for the DSA proposal than for the alternative amendment.  This amendment would offer a stand-alone Dairy Producer Margin Protection Program.

While both the Dairy Security Act and the Goodlatte-Scott proposal will replace the current Milk Income Loss Contract program with a new margin insurance program for producers, only the DSA adds a Dairy Market Stabilization Program (DMSP) that would require dairy producers to stop production in response to market drivers or take a milk check deduction.  Professor Woodard explains, “The implication of the DMSP would be further government flows towards regions dominated by larger producers – many of which are in the process of contracting production growth – at the expense of consumers, taxpayers and regions dominated by smaller producers”. 

Similarly, the International Dairy Foods Association, supporter of the Goodlatte-Scott amendment, says eliminating the DMSP would cost taxpayers less and would benefit smaller farmers.  However, the National Milk Producers support the DSA and say that the amendments proposal to eliminate the DMSP would remove the cost control mechanism and increase government and taxpayer costs.  Jerry Kozak, CEO of National Milk Producers Federation, argues that, “Its dairy farmers who have expressed genuine interest in limiting the costs of farm programs, unlike processors, who have no real stake in limiting government costs, and stand to benefit by creating a surplus of milk that puts farm families out of business”.

Despite the struggles facing the Dairy Industry, the California Dairy Farmers Association recently approved a slight increase in the price of milk.  The minimum milk price paid to California dairy farmers will go up starting next month, but the adjustments amount to just a fraction of what producers had requested and half of the last price increase the California Department of Food and Agriculture granted earlier this year.  Also in progress, is the drafting of a regulatory language to initiate the process of replacing California’s current milk marketing order with a federal order.  Three major dairy cooperatives- California Dairies Inc., Dairy Farmers of America, and Land O’ Lakes- are working on writing a properly written federal milk marketing order, which could potentially result in higher farm gate prices and benefit California Dairy Farmers. 

As Congress struggles to pass a Farm Bill, farmers, ranchers and dairymen sit and wait to see the impacts on their industry.  Allowing the Farm Bill to expire could cause soaring prices and even more uncertainly for the agricultural industry.  This debate just proves that farm policy has become more political than ever before. 

 

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