The top Democrat on the House Agriculture Committee proposes a revamped safety net for dairy farmers

TIMES WASHINGTON CORRESPONDENT

WASHINGTON — House Democrats took a first step this week toward reworking the safety net for dairy farmers, drafting a package of reforms modeled after a proposal from farmer-owned bargaining cooperatives.

A lobbying group for dairy processors, however, opposed key provisions, and the House Agriculture Committee’s Republican chairman was lukewarm at best.

The measure from Rep. Collin C. Peterson, D-Minn., includes an insurance program to protect farmers’ profit margins, as well as a “market stabilization” plan to discourage farmers from boosting milk production or expanding their farms. It ends the Milk Income Loss Contract program, which pays farmers a government subsidy when market prices for milk fall below $16.94 per 100 pounds of milk.

“Current dairy programs aren’t working; they’re not keeping up with the challenges facing today’s dairy industry,” Mr. Peterson said in a news release.

The most contentious element is the market stabilization plan, which would reduce farmers’ milk payments when markets signal that overproduction may loom — such as when profit margins are tight and farmers want to produce more milk. Farmers would be paid on a declining percentage of their production at those times.

The plan also proposes changes in the federal marketing order system that sets minimum milk prices, and it eliminates the dairy price support program through which the government buys excess dairy products to discourage prices from falling below a certain level.

Supporters say the supply management system is important to keeping production in check and to reduce price volatility that has strained the dairy industry in recent years. But dairy processors strongly oppose the idea, which they consider a government intrusion into the marketplace that might force them to pay more for milk than the market dictates.

When the margin between the all-milk price and the cost of feed is less than $5 per 100 pounds of milk for two consecutive months, for instance, farmers would be paid on 97 percent of their “base” milk marketings and be subject to reduced payments equal to as much as 7 percent of actual milk marketings.

Mr. Peterson modeled the proposal closely after a plan called Foundation for the Future crafted by the National Milk Producers Federation, representing farmer-owned cooperatives. The NMPF praised his proposal and announced a series of community meetings around the country to promote it with farmers.

One of those meetings will be Aug. 10 in Syracuse.

Although Mr. Peterson said he has never seen the industry as united as it is now, the NMPF’s proposal has been anything but unifying across the industry. Farm groups and dairy processors agree the system needs big changes, but remain split on the role of government. When the International Dairy Foods Association criticized Mr. Peterson’s proposal this week, the NMPF responded with an email to reporters calling the processor groups’ assertions misleading.

“Instead of encouraging job growth and reducing regulation on an already overregulated industry, the discussion draft would impose new and intrusive government mandates on dairy markets at the cost of a growing dairy export business and the jobs that have come with it,” said the IDFA’s chief executive officer, Connie Tipton.

Northeast lawmakers have shown little willingness to part with the Milk Income Loss Contract program. Sen. Kirsten E. Gillibrand, D-N.Y., a member of the Senate Agriculture Committee, has said she wants to preserve the MILC program while adopting optional margin insurance similar to the House proposal, for instance. But that could throw off the CBO estimate.

Rep. William L. Owens, D-Plattsburgh, planned to read the proposal this weekend, said a spokesman, Sean Magers.

The lack of unanimity may be a problem with the Republican chairman of the House Agriculture Committee, Rep. Frank Lucas, R-Okla., who has said he does not want to delve into dairy policy ahead of the 2012 Farm Bill unless all sides agree on the basics.