Congressional battle over the farm bill and dairy policy continues

The Senate passed a farm bill while the House voted one down.

June brought us the first day of summer and also saw the passage of a version of the new Farm Bill in the Senate but defeat of another version in the House of Representatives. The version of the new five-year farm bill, officially called the FARRM Act, passed in the Senate contained about $2.4 billion in a year in cuts over the current law and about a $400 million per year decrease in food stamp spending. A highly amended version of the bill, containing total cuts of about $20 billion, was voted down in the House of Representatives a few days later.

The new Farm Bill represents about $500 billion in government spending over five years. Food and nutrition programs, such as the food stamp program (known as SNAP, Supplemental Nutrition Assistance Program) account for about 80 percent of farm bill spending while more traditional “farm” programs, such as crop insurance and land conservation programs, account for only about 20 percent. The big battle in Congress has been over SNAP spending. The issue pretty much follows party lines with Democrats opposing cuts while Republicans support them. It is estimated that if $20 billion was cut from the bill food stamp benefits would end for about 2 million people, which amounts to about 4 percent of the current total enrollment of 45 million. The house version of the bill also contained a controversial amendment, primarily supported by Republicans, that would have required food stamp recipients to either be working or at seeking work. The Obama administration promised to veto the House version as they opposed House amendments to the food stamp program, both the monetary cuts and work provisions, and supported the Senate version of the bill.

Dairy policy is really a very minor portion of the farm bill despite being extremely important to dairy producers, milk marketing cooperatives, and dairy product manufacturers. The Senate version of the farm bill retained the Dairy Security Act (DSA); while the House version rejected DSA in favor of the Dairy Freedom Act (DFA) commonly referred to as the Goodlate & Scott Dairy Amendment. Both DSA and DFA would provide dairy producers with subsidized income over feed cost insurance programs. The primary difference is that in the DSA program dairy producers who opt to participate in the margin insurance protection program would also be required to cut milk production under certain circumstances when there was considered to be a national surplus of milk. The DFA program does not contain the mandatory supply management clause. For a more thorough explanation of these programs please see my earlier Michigan State University Extension news article, “Congressional battle over dairy policy is not over”.

Unfortunately, the whole process has turned into an exercise in finger pointing. Congressional Democrats and Republicans are pointing fingers at one another primarily over the food stamp provisions of the bill. Then, on the other hand, dairy producers, milk marketing organizations and dairy product manufacturers are pointing fingers at one another over the dairy provisions of the bill. In general, dairy producer groups and milk marketing organizations favor the Dairy Security Act (DSA) with supply management provisions while dairy processors favor the Dairy Freedom Act (DFA) commonly referred to as the Goodlate & Scott Dairy Amendment with no supply management provisions. The Congressional Budget Office has labeled the Dairy Security Act as an “unfunded mandate on America’s businesses” because the program would supposedly impose implementation costs of more than $100 million annually on food processors. On the other hand, dairy producers and milk marketing organizations support the Dairy Security Act since it may hold the potential to avoid extremely low milk price cycles such as occurred in 2009. In 2009, due to oversupply of milk, milk prices paid to dairy producers tumbled and they suffered the loss of billions of dollars’ worth of equity.

The chairman of the House Agriculture Committee, Frank Lucas (R-OK) doubts there will be another chance to craft and pass a new farm bill before this fall’s election season congressional recess. The extension of the 2008 farm bill, passed earlier this year when consensus on the 2012 bill could not be achieved, is due to run out at the end of September. At this point in time no one knows what will happen. One thing is for sure: by the end of September we will either have a new farm bill, the 2008 bill will have to be extended again, or the budget will really be busted as the 1949 Permanent Agricultural Law could potentially take effect with its unrealistically high parity prices guaranteed to farmers for corn, wheat, milk and other commodities. It was the specter of parity pricing that forced Congress to extend the 2008 farm bill earlier this year.

Some are calling for the farm bill to be separated into two parts, one part dealing with traditional farm programs and the other dealing exclusively with food and nutrition programs like SNAP. On the surface this may sound attractive to farmers and farm groups. However, as Ohio State University farm policy expert Carl Zulauf noted, “Separation of the bill could lessen broad-based support to get a farm safety net passed.” Farmers and farm state congressional representatives are in a very small minority. However, their majority colleagues in congress from the cities and suburbs depend on them for support of food and nutrition program issues. Losing that coalition could bring more problems to farmers than separation of the issues would solve.

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