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Dairy policy to regulate milk supply is latest farm bill snag

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The long-overdue farm bill being negotiated in Congress has been snagged by controversy over a dairy policy designed to help regulate the national milk supply.

Rep. William L. Owens, D-Plattsburgh, has blamed House Speaker John Boehner, R-Ohio, for hosting press conferences to criticize the dairy policy. Mr. Owens, who cancelled an interview about the matter Tuesday afternoon, recently aired his view about the farm bill hold-up in a press release.

“Farmers deserve the certainty of a five-year farm bill,” Mr. Owens said. “We have made great progress on the farm bill in the last few weeks because those involved have been willing to compromise. Instead of hosting press conferences and using inflammatory rhetoric, speaker Boehner should work with members of both parties to get this done.”

Mr. Owens has been an avid supporter of a milk-supply management program, which he believes will help stabilize milk prices for dairy farmers. Called the Dairy Market Stabilization Program, the government-led initiative would endeavor to control the national milk supply by shaving a percentage of the payment farmers take home for milk when there is an oversupply. In theory, doing so would force farmers to decrease the supply of milk and raise profit margins as a result.

Enrolling in that supply management program would be mandatory for farmers who sign up for a new margin insurance program that would replace the current Milk Income Loss Contract program. Under the retooled program, the U.S. Department of Agriculture would make payments to farmers when the national margin, which is the average milk price minus average feed costs, drops below $4 per hundredweight.

The supply management program is designed to kick in quickly but infrequently, spurring farmers to adjust milk production as a means to raise profit margins, Mr. Owens said. Reduced milk payments to farmers would be triggered under the following scenarios, according to the Congressional Research Service:

n When the national margin is below $6 for two consecutive months, farmers will receive milk payments based on either 98 percent of their production base or 94 percent of the current month’s milk marketings, whichever is greater.

n If the margin falls below $5 for two consecutive months, farmers will receive payments based on 97 percent of their production base or 93 percent of the current month’s milk marketings.

n If the margin falls below $4 in a single month, farmers will receive payments based on 96 percent of their production base or 94 percent of the current month’s milk marketings.

n The stabilization program will be suspended when the margin is above $6 for two consecutive months.

The farm bill approved by the Senate includes the supply management program, but the approved House version doesn’t. The final farm bill now being reconciled in Congress by leaders from the House Agriculture Committee might not include the dairy policy , according to Mr. Owens, because Mr. Boehner has warned leaders he’ll refuse to let the bill come to the floor if the measure is included.

Opposition from Mr. Boehner is one of the final hurdles that needs to be overcome for the farm bill to be approved by the end of January, according to Mr. Owens. Most other programs, including cuts to food-stamp funding, have been agreed on by leaders in the House and Senate.

Dairy processors across the Northeast are bitterly opposed to the supply management program, said Bruce W. Krupke, executive vice president of the Northeast Dairy Foods Association. The association represents 120 dairy plants across eight Northeast states, including New York.

Because the policy could deter dairy farmers from increasing milk production, it is viewed by processors as a major detriment, Mr. Krupke said. He contends the national milk market is becoming increasingly stable as the U.S. continues to export more dairy products overseas. About 16 percent of the national milk supply is exported, he said.

“About eight years ago, exports were about 2 to 3 percent overall, but they’ve been going up every year,” Mr. Krupke said. “This trend has provided dairy farmers with higher income and revenue for milk. Processors are concerned that if (the government) controls the supply, they can control it to the point at which there’s not enough milk in the Northeast region. If that happens, processors and manufacturers here will move out of this region and go to where there’s an adequate supply.”

Mr. Krupke contended that Mr. Boehner has the political power to block the supply management program from being included in the final farm bill, which legislators hope to approve by the end of January.

“Our government needs to clearly understand that having one segment of the industry control the supply is wrong,” Mr. Krupke said. “This program could reduce the strength of the dairy industry in the U.S. on many levels.”

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