Rep. Collin Peterson (D-MN) released a dairy reform draft that is very similar to the National Milk Producers Federation (NMPF) proposal entitled Foundation for the Future. Rep. Peterson intends to accept comments and suggestions on the bill for the next couple of weeks and then introduce a bill.
Rep. Peterson’s proposal consists of three main components: 1) a margin protection program as a replacement for the current dairy price support system and the Milk Income Loss Contract (MILC) program; 2) revisions to the Federal Milk Marketing Order system (FMMO), reducing the number of classes of milk; and 3) a supply management provision. Rep. Peterson’s draft has two changes, compared to the NPMF proposal; both of which were made to ensure the new bill is scored by the Congressional Budget Office (CBO) as costing less than current law. With respect to a margin protection program, the amount of basic (no-cost) margin coverage has been adjusted to 75% of production history. However, the gross margin supplemental coverage has been maintained at 90% of the producer’s production history. In addition, 50% of any dollars collected as a result of triggering the supply management provision will be remitted to the Treasury for deficit reduction.
Farm Bureau supports the provisions in the bill that replace the current price support system and the MILC program with a margin protection program. In addition, we support the changes to the FMMO. However, Farm Bureau opposes the mandatory supply management provision, as currently drafted.
Four alternative ideas were submitted to Rep. Peterson to the proposal’s supply management mechanism:
1. Farm Bureau requested the CBO score what savings would be available if the supply management mechanism were limited to no more than 60 or 90 days in an 18 month period.
2. Farm Bureau requested that CBO determine a basic administrative fee to be assessed for the catastrophic protection (basic) level instead of the supply management provision; precedent for such a fee is the crop insurance catastrophic coverage charged to crop farmers at $300 per crop per county.
3. Farm Bureau suggested that producers be given the choice to participate in the supply management provisions by either one of the following two methods:
a. offer a one-time sign-up option at the start of the program, or
b. offer an annual opt-out option whereby producers could withdraw at the start of the year from the supply management provisions, but then be ineligible for marginal protection.
4. Farm Bureau suggested that if supply management mechanisms were activated, that all of the funds be used to offset costs of the dairy program rather than for donation to food banks and promotion (where such funds would duplicate efforts of check-off promotions and current nutrition programs).
Farm Bureau calls on Congress to rethink National Dairy Programs. Specifically, Farm Bureau:
• Supports a market-oriented national dairy program that allows U.S. producers to compete in a world market based on fair and open trade policies.
• Supports a risk management program which offers protection based on gross margins (milk price minus feed costs).
• Supports using all funding previously allocated to the Milk Income Loss Contract (MILC) and dairy price support programs for a margin insurance program.
• Supports a competitive pay price to include consideration of two classes of milk, fluid and manufacturing.
• Opposes a mandatory quota system but is willing to consider a temporary supply management system.