Gillibrand takes aim at milk supply management plan

WASHINGTON — Sen. Kirsten E. Gillibrand moved to block a key part of a milk supply management program in the Senate Wednesday, setting up a conflict over the best approach to rewriting dairy policy well before next year’s farm bill debate.

Mrs. Gillibrand, D-N.Y., is trying to stop a voluntary system by which farmers would be discouraged from expanding production. The setup of the program hurts small and medium sized farms, Mrs. Gillibrand said in an interview Wednesday.

Mrs. Gillibrand’s measure is part of a complex spending bill moving through the Senate this week, and it also plays into the work a debt reduction committee is doing to identify deep cuts to domestic programs — including agriculture — by a late November deadline. She has filed an amendment to the bill to prevent any spending on the proposed program.

At issue is whether a newly designed dairy program should include supply management in order to keep farmers from overproducing, which tends to drive milk prices lower. Rep. Collin C. Peterson, D-Minn., the top Democrat on the House Agriculture Committee, has proposed a system that pays farmers on less than their full production of milk when the market indicates supply may outpace demand.

The House and Senate Agriculture committees may include Mr. Peterson’s proposal in their recommendations to the debt reduction committee, as he has asked. The panels have already announced endorsing cuts to many farm programs, including direct payments to farmers, although Mrs. Gillibrand said she thought the dairy safety net could survive the process.

The problem with Mr. Peterson’s approach, in Mrs. Gillibrand’s view, is that it goes hand in hand with a new margin insurance program, which would pay farmers when low milk prices or high feed costs eat into profits. In order to participate in the margin insurance program, which may appeal most to smaller farms, farmers would have to agree to supply management as well.

Big farms probably won’t choose to participate, the senator figures, because they often have the resources to play the futures markets or use similar means to protect against price swings.

“We don’t agree with tying supply management to insurance,” Mrs. Gillibrand said.

Her move won unusual praise from the International Dairy Foods Association, representing companies such as Kraft Foods and Great Lakes Cheese that buy milk from farmers.

In a statement Wednesday, the IDA’s senior vice president for legislative and economic affairs, Jerry Slominski, said in a statement, “IDFA opposes all forms of supply management . . . Rep. Peterson’s dairy supply management proposal would limit growth, curtail exports and hinder job creation.”

In a nod to Mrs. Gillibrand’s state, Mr. Slominski said, “New York is experiencing tremendous growth in dairy manufacturing and depends on continued growth of the high-quality New York milk supply.”

Mrs. Gillibrand does not oppose all supply management for milk. She has proposed a slightly different version, allowing states such as New York to remain out of the program if the amount of milk processed by plants is greater than the state’s production — an indication, she has said, that demand outpaces supply and that farms should be encouraged to expand.

When the measure will face a vote is somewhat uncertain, as the Senate appears unlikely to finish the spending bill this week and is scheduled to be in recess next week.