April 23, 1999
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email:CGalen@nmpf.org
Under the terms of the 1996 Farm Bill, the dairy price support program has been significantly scaled back, and is scheduled to expire after Dec. 31, 1999. The legislation introduced in Congress Thursday by Rep. Collin Peterson (D-MN), H.R. 1535, would simply extend the sunset date of the price support program until the end of 2002, when the current Farm Bill is scheduled to expire.
NMPF strongly supports the extension “because the price support program, modest as it is, provides an effective dairy ‘safety net.' At a minimal cost, it helps ensure that there is at least a moderately protective economic safety net underneath dairy farmers,” said Jerry Kozak, Chief Executive Officer of NMPF. “At a time when Congress is grappling with the issue of how to deal with many severe economic uncertainties in U.S. agriculture, this bill goes a long way toward resolving that challenge favorably for dairy producers.”
The legislation introduced yesterday by Rep. Peterson, the ranking Democrat on the House Livestock Subcommittee, already has 20 original co-sponsors. It would maintain the present dairy price support level of $9.90 per hundredweight.
The USDA-administered price support program helps provide a floor under dairy farmer prices by purchasing cheese, butter and nonfat dry milk when the price of these commodities falls beneath the $9.90/cwt. level. Both butter and cheese are currently priced significantly above this level, so the program at this point only purchases supplies of nonfat dry milk, at a rate of $1.01 per pound. In the five-year period between 1994 and 1997, the program spent a total of $383 million on product purchases, the large majority of it on nonfat dry milk powder.
“If the current program is terminated at the end of 1999, nonfat dry milk prices in the U.S. will fall to world market prices levels during at least part of the year. NMPF estimates that the decline from $1.05 to $0.85 cents would reduce dairy producer revenues by $2.8 billion per year. Plainly, there is an extremely positive cost-benefit ratio to the current program,” Kozak said.
Congress has budgeted $6 billion in Fiscal Year 2000 to improve crop insurance and offer other sectors of agriculture some form of safety net, according to Kozak, who estimated that the cost of an extension of the program would be $220 million annually.
“Extending the dairy price support program would cost just a fraction of the $6 billion that Congress already intends to spend on crop insurance, and it will provide reasonable income protection for dairy producers without distorting the market,” Kozak said.
“Although there has been discussion about other means of establishing a dairy safety net, the fact is that the current price support program is simple, workable, and affordable. We're confident Congress will acknowledge this fact by approving H.R. 1535,” Kozak said.