Time to milk savings for government and industry by passing the Dairy Security Act

Dec 12, 2011

Seattle Times

By Jim Werkhoven

December 12, 2011

Dairy farming gives a big boost to Washington's economy. Milk is the state's second most valuable farm crop, behind only apples. It is expected to generate a whopping $1.3 billion in 2011.

Unfortunately, Washington's dairy farmers took a hard punch in the gut two years ago and many have yet to recover. As the Great Recession took hold, milk prices plummeted. At the same time, prices paid for animal feed went through the roof.

You don't have to be an economist to figure out what happened next. Margins shrank to razor-thin levels — or disappeared completely. Many of us took on debts we won't repay for years to come. Others simply didn't survive.

Obviously, the elaborate system of federal supports that is supposed to shore up farmers in difficult times wasn't working.

That's not surprising, since the basic elements of that system are 70 years old and focused on milk prices. The problem in 2009 — and today — is margins. The high cost of feed, stemming from increased corn-ethanol production and other factors, cuts into our income even when prices are high. When prices are low, we are under water.

Thankfully, Congress is starting to pay attention.

In September, two good friends of farmers — former House Agriculture Committee Chairman Collin Peterson of Minnesota and Idaho's Mike Simpson — introduced a bill to reorient federal dairy programs to address today's environment. Their bipartisan Dairy Security Act is based on recommendations from farmers across the country, represented by the National Milk Producers Federation.

The bill scraps the current, dysfunctional federal dairy program and sets up what amounts to a margin-based safety net. Federal support kicks in when margins are squeezed. To counter steep price declines or prolonged periods of low or negative margins, milk production could be cut temporarily. In those situations, for a few months farmers wouldn't be paid for a tiny fraction of the milk their cows generate.

Some dairy farmers, of course, don't want anyone telling them how much milk they can or can't produce. For that reason, this new program would be completely voluntary. Those who don't like it can opt out. Everyone would have a choice between a free market environment and a government safety net that requires them to cut their milk output when times get especially tough.

That sounds good, you might say, but how much does it cost? And that's the best news. The Dairy Security Act saves money — more than $160 million over five years, according to the Congressional Budget Office. That's why, before Thanksgiving, the congressional supercommittee was looking at the bill as a deficit-reduction measure.

Sadly, the supercomittee failed to reach agreement on a plan to cut the deficit, and with that went any chance of quick action on the Dairy Security Act.

But a bigger opportunity lies ahead. Next year, Congress is scheduled to write a new multi-year farm bill. The Peterson-Simpson bill will be front and center when the agriculture committees look at the dairy program. It's the only comprehensive dairy reform plan on the table and it's picking up cosponsors daily, including U.S. Rep. Rick Larsen, D-Lake Stevens.

Dairy farming adds jobs and income to Washington's economy and broadens our tax base. But Washington's dairy farmers can't afford a repeat of what happened two years ago. We need a safety net that addresses today's problems. Our consumers need it too, if our state is to continue to offer them an abundant and affordable supply of fresh, local milk.

That's why all of us should be urging the rest of Washington's U.S. House delegation to co-sponsor the Peterson-Simpson bill. Sens. Patty Murray and Maria Cantwell should support it as well. Strong support from our region will help assure the Peterson-Simpson bill gets a close look in next year's farm-bill deliberations.