CBO and Vilsack differ on potential cost of dairy reform

By Aarian Marshall

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, August 2, 2012 -The International Dairy Foods Association takes issue with Secretary of Agriculture Tom Vilsack's belief that the cost of dairy margin insurance could become “very, very expensive” without a mechanism that functions like a provision to discourage production and, thus, payments, when dairy farmers' cost-price margins collapse (Agri-Pulse, July 25).

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Jerry Slominski, IDFA's senior vice president for legislative and economic affairs, said a Congressional Budget Office estimate of the cost of a margin insurance program without the supply management feature that IDFA dislikes would save money.

The dairy program would cost $47 million less over the next decade if it provided a stand-alone margin insurance plan without deductions for excessive production, CBO said. The House Agriculture Committee defeated, 29-17, an amendment by Reps. Robert Goodlatte, R-Va., and David Scott, D-Ga., to do so.                                                         

“But the bottom line is Goodlatte-Scott saves $47 million while the bill saves $38 million,” Slominski said. The secretary “is wrong that budget considerations force supply management if CBO is the referee.”

IDFA said before the committee vote July 11 that, with its plan, premiums paid by dairy farmers “would need to be slightly higher if the supply management program was dropped, yet overall most dairy farmers would be better off because their income would not be reduced due to supply management. The higher premium costs are more than offset by the reduced income caused by the supply management program.”

An early-July analysis prepared by Wisconsin dairy economist Mark Stephenson, promoted by IDFA, concludes that the Goodlatte-Scott approach would be less costly than current programs in most cases but acknowledges that “high participation levels could cost somewhat more than existing policy.” However, he does not see high rates of participation as likely. “The low to medium scenarios of adoption are the more likely outcomes,” he said, but “until farmers actually have the ability to choose, one cannot know.”

 

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