March 2002
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There will be several very contentious issues that need to be resolved by the House and Senate conferees. Among the points of contention: A Senate proposal to ban meatpacker ownership of livestock; a Senate proposal to reduce overall farm program payment limitations, even as the House version actually raises the payment limit; and funding levels proposed in the Senate that result in more of the money being paid out in the first five years of the bill, whereas the House farm bill version allocates money more evenly over an entire decade.
Then there's the dairy program. The Senate farm bill version also includes a new, $2 billion direct payment program for dairy farmers. During the next four years, the Senate bill allocates $500 million of that sum for farmers in the 12 Northeastern states. The rest of the country would have access to the remaining $1.5 billion.
The Northeastern payment program is tied to the fluid milk price. When the Class I price drops below $16.94 per hundredweight, producers in those states would be paid the difference between the actual Class I price and the target. Meanwhile, the payment program for the other 38 states is a reflection of the quarterly all-milk price. When that price dips below the historic five-year average of the all-milk price, producers would get 40% of the difference between the two figures. For both programs, payments would be limited to eight million pounds of production. Any milk produced beyond that figure would not be eligible for the countercyclical payments.
The question that NMPF has been asked repeatedly is, Why would the Senate devise a two-tier program that treats farmers differently, not just based on geography, but also on the size of their operations? And the simple answer to that question is that this Senate program is the result of careful negotiations between Senators from different parts of the country, and therefore reflects certain political realities. There's more to it than that, of course, but the bottom line is that the Senate plan is much more a reflection of political factors than any relevant policy rationale.
Throughout the Senate deliberations on the dairy program - and during the conference process now underway - NMPF has repeatedly asked senators and representatives to heed the following principles in making up their minds about what program to approve. We feel the following principles are vital to arriving at a final program that is acceptable to all:
- Any dairy payment program must be national in scope.
- It must not discriminate between states and regions.
- It must not discriminate between farmers by limiting payments based on herd size.
- It must not cause competitive disadvantages or advantages between dairy farmers.
- It should not increase production to the point where overproduction eventually erodes the farm gate prices.
In all of the speculation about the Senate's countercyclical plan, it's very important to remind people that both the House and Senate bills already include several other dairy provisions that truly do meet the above criteria. Those dairy provisions include:
- Extending the Dairy Price Support program;
- Requiring importers to pay their fair share into National Dairy Promotion and Research Programs;
- Extending the Dairy Export Incentive Program (DEIP).
- Fixing the statutory mandatory inventory and price reporting language to prevent further costly reporting errors by the USDA, and;
- Supporting increased Market Access Promotion (MAP) program funds.
There can be no doubt that these elements are fair and equitable, and thus they should not provoke any dispute within the House-Senate Farm Bill conference. But the Senate's proposed dairy plan is going to be a much tougher issue to reconcile during the negotiations. And ultimately, if the choice is between some additional money for dairy farmers (even if the payment plan is less than perfect), and no money at all, then I think we'd have to say we support keeping that money on the table. We're not going to let perfect be the enemy of good, because the feedback we've received so far is that some money for farmers is better than none at all.
If elements of the Senate dairy program are retained in the final version, it certainly wouldn't be the first time that politics and policy clash, with the former getting the better of the latter. It happens every day in Washington, where creating an artful compromise is a highly-prized skill. But as much as we are concerned with the final outcome, more important is the process by which the ends are to be reached. We have stood by our principles during the year-long Farm Bill debate, and will continue to do so, in the hope that we can arrive at a conclusion that leaves everyone satisfied.
