Farm Bill Agreement Reached; A Big Win on Dairy Provisions

Late in the day on Friday, April 26, Farm Bill Conference Chairman Rep. Larry Combest (R-TX) announced that an agreement had been reached on the structure and specific provisions that would be included in the final farm bill. While final language is not yet available, IDFA believes the dairy provisions to be as follows:

• NO DAIRY COMPACTS OR MILK PRICING FLOORS
• Removal of the sunset date for the MilkPEP program (and other technical changes sought by IDFA)
• Continuation of the dairy price support program at $9.90 per hundredweight (with no changes to the Secretary's authority to make adjustments to the product purchase prices when needed)
• A new direct payment program that will pay dairy producers 45% of the difference between $16.94/cwt and the Boston Class I price on the first 2.4 million pounds of production (about 133 cows) for approximately 3 ½ years. Total funding for this provision is about $1.3 billion, less than the $2 billion sought in the Senate farm bill version.
• A new assessment on dairy imports to fund the producer check-off program
• Continuation of the Dairy Export Incentive Program (DEIP)
• Mandatory reporting of inventories
• Three new studies:
  1. A comprehensive economic evaluation of the potential direct and indirect effects of the various elements of national dairy policy on farm price stability, feeding programs, and the price of milk;
  2. A study of the effects of terminating all federal dairy programs and giving states the authority to manage milk prices and supply; and
  3. A study of the effect of raising the standard of identity for fluid milk to include a higher minimum protein content that is commensurate with the average nonfat solids content of milk produced in the United States.

It is significant that we have put interstate dairy compacts behind us and moved away from new policies that artificially prop up product prices, making dairy ingredients more costly and finished products less competitive. In addition, even though the new payment program for dairy producers is limited, it is expected to encourage some production increases and therefore slight decreases in milk prices. For smaller farms, these price decreases will be more than offset by the payments; some larger farms may have to live with overall reductions in their milk prices.

The elimination of the sunset date for the MilkPEP program is not a moment too soon since current law calls for an end to the program on December 31, 2002. Without passage of this legislation, the MilkPEP Board was faced with the possibility of implementing a "wind down" plan, but now that won't be necessary. The law continues to provide for industry referenda to ensure that the MilkPEP program has broad industry support.

As IDFA reported last week, there was a threat to include language that would have frozen the purchase prices for products bought by the Commodity Credit Corporation (CCC) under the Dairy Price Support Program. However, this language was rejected by the conferees, because there was a considerable amount of disagreement over adding such provisions. IDFA and many members expressed strong opposition to continuation of the program if the authority for product price adjustments was eliminated.

In addition, farm bill conferees also dropped the idea of a possible country-of-origin retail labeling provision for processed foods that was brought up last week. This reported proposal could have required food processors to label the country-of-origin for several ingredients within a finished product. IDFA and other food organizations quickly opposed the idea, stating such unnecessary labeling would be both burdensome to the food processing industry and confusing for consumers.

Farm bill language is now being finalized by staff, so that a completed bill can move to the House and Senate for final passage perhaps this week. Once passed by both chambers, the legislation then goes to President Bush for his signature.

IDFA would like to thank everyone who worked hard on the farm bill. As the dairy provisions now stand, IDFA considers this legislation a big victory in most respects. IDFA will continue to provide its members additional details on the farm bill process as such information becomes available. ###

Posted April 29, 2002