New Farm Bill Debuts to Mixed Reviews

Earlier this month, Congress finalized and President Bush signed a farm bill package that is estimated to cost $190 billion over the next 10 years, nearly $83 billion more than the cost of continuing programs under the 1996 farm bill, according to the Congressional Budget Office (CBO). Representatives from academia, industry, media, Capitol Hill, U.S. trading partners and agriculture groups have weighed in on the U.S. farm law -- with a wide variety of reactions. The one thing most agree on is that the law is a huge step away from the 1996 farm bill, which was designed to wean farmers off government subsidies.

Among several dairy provisions in the law is a new direct subsidy for U.S. dairy farmers. Dairy producers will now receive monthly payments that are calculated by taking 45% of the difference between $16.94/cwt and the monthly Boston Class I price on the first 2.4 million pounds of milk production from each farm per year. The widely reported CBO estimate of this direct dairy payment program is more than $1.3 billion for 3 ½ years.

Here is a sampling of reactions to the new dairy payment program and the overall farm bill.

Analysis from University of Wisconsin Professors Ed Jesse and Bob Cropp
"The direct payment program for dairy is a target price-deficiency payment program similar to what has been used under several commodity programs since the 1970s…Monthly payments will be made to producers on actual milk marketings up to 2.4 million pounds per year. It is not clear from the language of the Act how the annual cap will be imposed, that is, whether producers will be ineligible for any further payments once they have marketed 2.4 million pounds of milk or whether the annual cap will be scaled to a monthly equivalent. Neither is it clear how USDA will determine whether producers are producers on separate dairy operations or a single dairy operation for purposes of applying the 2.4 million pound annual cap. While payments per operation are capped, there is no limit on aggregate payments over the life of the program. CBO scored the cost of the program at $1.3 billion. Our estimate of total costs is over $3 billion."

Statement of John Jeter, President and CEO, Hilmar Cheese Company
"After bold moves by Congress in the 1990s to reform a government-dependent dairy industry, legislators are taking a huge step backward with the current farm bill. And, unfortunately, that step backwards is going to cost California dairymen. Those who have been successful in the dairy industry, whether as farmers or processors, are those who are market-oriented. Dairy producers and processors have made great strides in producing products that the market demands…This farm bill sends the message that what people want to buy is not important. By making $1.4 billion per year in direct payments to dairymen, regardless of market demand, dairy producers will be encouraged to produce more milk than consumers will buy. That places the burden of purchasing surplus dairy products on the taxpayer. And, it dooms dairymen to chronically low milk prices…it is not just California dairymen who will lose out. It is all of those in agriculture and the dairy industry who will now be turned away from the kind of positive market orientation that causes industries to thrive. The money that will go into direct farm payments would have been better spent in research or market development, rather than on subsidies, which encourages the industry to move backwards. We applaud the efforts of those legislators who fought an up hill battle to make the market place the most important aspect of farm legislation. It is unfortunate that they have not succeeded."

Statement of Wisconsin Governor Scott McCallum (R)
"This dairy safety net is an important step in establishing a more level playing field for Wisconsin producers. It's a step in the right direction toward treating Wisconsin's farmers the same as a farmer in Vermont or anywhere else in the country."

Statement of the Cairns Group of nations (Australia, Canada, New Zealand, Brazil and 12 other countries) regarding the U.S. farm bill
"The new legislation makes the U.S. administration's task of continuing to take a leading role in the Doha round more difficult. It will provide comfort for those World Trade Organization members who are determined to resist meaningful reform of the agriculture section."

Quote to Media by European Union Agriculture Commissioner Franz Fischler
"The U.S. has clearly flunked the test...At a time when all developed countries have accepted the direction of farm support away from trade and production supporting measures, the U.S. is doing an about turn and heading in the opposite direction."

Statement of USDA Secretary Ann Veneman after the farm bill signing
"America's farmers and ranchers are the backbone of our nation and work hard every day to provide food, clothing and energy to consumers around the world. This bill also provides generous support to help producers when times are tough….While this bill is not perfect, it reflects a compromise agreement and I appreciate the work of the conferees in achieving consensus under very difficult circumstances."

Quote to Media by Kay Henninger, dairy producer on a 55-cow farm in Minnesota
"It's about time they do something. It will be helpful. It won't put us over the top or anything."

Washington Post Editorial, "Stop the Farm Bill"
"The basic flaw of the bill is that the lion's share of its money goes to subsidize farm output, a policy that stimulates supply, drives down prices and hurts the farmers it was meant to help."

Quote to Media by Senator Ben Nelson (D-NE) about the farm bill
"It's so much more positive for agriculture than the past four years under the Freedom to Farm Act, you've got to embrace it."

Quote to Media by Senator Chuck Grassley (R-IA) about the farm bill
"We seem to be rushing to milk the federal cow before anyone checks the breed, much less the gender."

Quote by Purdue University Agricultural Economist Otto Doering
"This is probably the least market oriented farm bill that we've ever had because farmers will get no price signals from the market. All their price signals will be from the government programs." ###

Posted May 20, 2002