Federal Dairy Policy Milks AG Spending

In the 1800s disgruntled farmers sought reform under the slogan “raise less corn and more hell.” Today, all Americans ought to be raising hell and seeking redress because competing federal dairy policies undermine the family farm and undercut expansion into new trade markets.

U.S. Secretary of Agriculture Mike Johanns, seeking input on the 2007 congressional farm bill, warns that — with a $300 billion-plus federal budget deficit– the bill will have to do more with less money. A Senate Agriculture Committee hearing in Albany will underscore this point. A study by the secretary?s own department underscores that dairy policy is doing less with more money — and creating more mischief.

Listen to Dave Juday of the Washington-based Institute for 21st Century Agriculture:
?That study, requested in the 2002 farm bill, found that the Milk Income Loss Contract (MILC) program and the dairy price support program ? one tied to individual production, one tied to market price levels? work against each other. Without the MILC program, the remaining dairy programs raised the all-milk price by 3.8 percent over a five-year period. But when the MILC program is included, the increase was only about 1.5 percent. In essence, the USDA is paying twice for the same milk.?


Even more incredible is the fact that Congress resurrected the costly MILC program by attaching it to the budget reconciliation package passed last week by Congress. That legislation is intended to cut federal spending, but adds a billion dollars for a new MILC program. (When created in 2002, MILC was expected to cost $900 million over four years; but it ballooned to cost more than $2 billion before it expired last year.)

So unless there is redress by the Congress, the real price is paid by other crop programs bearing the brunt of the federal budget ax driven by deficit worries.

It gets worse. This mismanaged dairy price support program fouls up our international trade effort.

Dairy is responsible for 30 percent of the so-called Amber Box payments by the United States, which are capped by the World Trade Organization because they distort trade. Because of these caps, Juday and other experts say each dollar spent on dairy programs not only reduces payments made to traditional crop programs but also perpetuates trade-distorting policies that put all other commodities at risk for WTO fines and sanctions.

What is to be done?

Simply, federal dairy policy should not be allowed to disrupt the marketplace or undermine our trade commitments. U.S. dairy policy must be overhauled to allow the industry to evolve and compete in the international marketplace instead of relying on inefficient subsidy programs and a regional milk-pricing system dating from the Great Depression.

Inexplicably, the inclusion of MILC program in the budget reconciliation bill leaves this nation with two countervailing dairy subsidies that must be ultimately resolved. Congress can?t delay an inevitable resolution for long. It must now reform and harmonize the various dairy policies into a fair one consistent with our nation?s international trade obligations. Just like in those heady days in the 1800s of the ?farm revolution,? more citizen pressure on Congress is needed to cut costs and institute free market reform.
Phil Kent is an author, former augusta newspaper editor and panelist on Atlanta WAGA-TV’s The Georgia Gang.

Phil Kent is an author, former augusta newspaper editor and panelist on Atlanta WAGA-TV’s The Georgia Gang.