Farm Bill Compromise Expected Soon, But Legislators Still Processing Milk

Jan 27, 2014


This week a congressional committee is expected to come out with a compromise on the Farm Bill after months of debate. While the rumor on Capitol Hill is that a compromise has been reached on funding for food assistance, dairy programs remain a source of contention. Legislators agree the bill should provide a safety net for dairy farmers, but they’re hung up on how the program should be structured.

Since 2002, smaller dairy farmers have been able to get help from the government under the Milk Income Loss Contract (MILC) program, which reimburses farmers for losses when milk prices drop below a certain point. It’s limited to smaller producers and the total payout amount is capped, but even with the limits it covers the majority of producers in Ohio.  Despite the popularity of that program, there has a been a push from multiple sides to restructure aid to dairy farmers in the coming Farm Bill.

The disagreement over exactly how to restructure the dairy safety net stems from a proposal by Senate Democrats on the committee to create a new program, margin insurance, that would serve as a kind of insurance for dairy producers in case of price fluctuation. Larger farms could also sign up, and farms would be required to pay premiums for different levels of coverage. The Senate version of the bill, however, would have required all the farmers enrolled in the program to agree to limit production in order to stabilize prices when they go down too far, a measure known as supply management.

House Speaker John Boehner of Ohio's 8th District came out swinging against the supply control part of the program, calling it “Soviet-style” risk management. Observers speculate his opposition stems from his connection to powerful dairy processors, who are concerned about the costs of monitoring such a program. Now, it seems unlikely a final compromise on the program will include supply management, but a margin insurance program available to large and small farms seems likely to emerge.

“By doing that there would be a fairly significant shift in the distribution of these benefits away from the small-scale producers towards the larger scale producers,” said Cameron Thraen,  a professor of economics at Ohio State University who specializes in agriculture.

Thraen, who’s written extensively on the issue, believes there’s another way to cover everyone: let your pint-sized farmers have the Milk Income Loss Contract, and let the larger farms purchase insurance through a margin insurance program. “One size fits all is really hard,” he said.

According to Thraen, in ten years, the U.S. government has spent around $5 billion dollars on the MILC program for small dairy farmers. It’s hard to say how much a new program protecting all sizes of dairy farms would cost, because that depends on just how much prices fluctuate and on the exact terms of the margin insurance program.

Meanwhile, Ohio farmers are anxiously awaiting a resolution on a bill that formally expired in 2012 and received a 9-month extension in lieu of Congress actually reaching a compromise. Currently, the extension is also expired and the USDA is conducting business without a formal law.

Mel Borton, a volunteer with the Ohio Farmers Union, says without government involvement in the dairy industry, small farms would have little chance of surviving.

“We didn’t think we would ever have megafarms,” Borton said, “but megafarms have arrived.”

And if the Farm Bill must be a bill for all sizes, he’ll take that over nothing.