Future of Dairy Security Act on Hold

10/13/2012 7:00 AM
By Charlene M. Shupp Espenshade Special Sections Editor

Absent a Farm Bill or Extension, $37.28 Parity Milk Price Possible

SUMMERDALE, Pa. — Congress hightailed it out of Washington in September, the earliest since 1960. It’s doubtful lawmakers were trying to grab the “fun” in dysfunction, though, as they left town with the lowest approval rating in recent history — a 13 percent Gallop poll rating.

According to one public-affairs specialist, this Congress has worked with the president to enact 173 bills, half the normal production of Congress. It also left the business of the 2012 Farm Bill undone, something that places the dairy industry in an awkward position.

Mike Oscar, managing partner at Gray and Oscar LLC, talked about the state of affairs for dairy farmers and what’s next for dairy policy as the closing speaker Tuesday at the Center of Dairy Excellence’s Dairy 20/20 Financial and Risk Management Conference at the Central Penn Conference Center.

The Senate passed its version of the 2012 Farm Bill with an overwhelming majority, and the same happened in the House Agriculture Committee. Yet the bill has languished on the House floor.

Describing the impasse, Oscar said House Speaker John Boehner, R-Ohio, has never liked a Farm Bill while Majority Leader Eric Cantor’s “ideological beliefs have stymied our efforts to advance the bill” and Rep. Bob Goodlatte, a Virginia Republican like Cantor, “will do anything against dairy policy.”

The Dairy Security Act, which is part of the proposed Farm Bill, includes risk-management and supply-management programs. The idea is to manage supply in times of milk overproduction while protecting producers with a margin insurance program.

This would replace the Milk Income Loss Contract and Dairy Export Incentive programs, whose funding would be redirected to pay for the new programs.

The Dairy Security Act was designed as an alternative to provide farmers options to protect their risk during times of low price margins and prices, such as the last downswing in 2009.

Responding to questions about farmers’ doubts about the proposal, Oscar said, “The big misnomer of this act is whether the stabilization stays or if it does work. If we have 70 percent or less, the program will not work. But we have to come up with an alternative.”

In the interim, Oscar’s focus is on MILC and a Farm Bill extension. The MILC program expired last month, and its triggers were set so low that even with high feed prices, it would be hard to qualify for payments.

Passage of the Farm Bill in the lame duck session is highly unlikely, Oscar said. The last time that happened was in 1990, and it was an extension of the 1985 Farm Bill.

But Oscar said he does expect an extension of some sort. Why? If no new bill is passed, the law would revert to the parity pricing level laid out in the 1949 Farm Bill and milk would increase to $37.28 per hundredweight.

The cost of milk production has been rising. Nationally, it comes in at $28.04 per hundredweight, but it is higher in the Mid-Atlantic and New England. In Pennsylvania, the cost of production is $31.05 per hundredweight, in Vermont, it’s $34 and in Maine, $35.

“If I am a dairy producer, I am hurting on these costs of production,” he said.

However for the Northeast, there is plenty of potential as new yogurt plants have popped up in the Mid-Atlantic.

“We are competing but we have to help our producers” deal with the higher production costs, Oscar said.

If an extension is passed, he said, the MILC program must be reverted to pre-September levels to provide any safety net for Northeast dairy farmers.

Gary Siporski of Vita Plus Corp. said another challenge for the Farm Bill is that many want to paint the industry with “a large paint brush” by thinking all farmers are profitable.

“We know the dairy industry is hurting” and hog and poultry farms are also facing losses, Siporski said. “The grain guys are making money, so everyone must be making money. That makes it tough on the Farm Bill.”


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