NMPF-backed Peterson-Simpson dairy reform bill introduced

WASHINGTON, Sept. 23 -- The dairy reform proposal developed by milk producer co-ops was to be introduced in the House today by Reps. Collin C. Peterson, D-Minn., and Mike Simpson, R-Idaho, with a warning that inaction could lead to a recurrence of the 2009 cost-price squeeze that drove many farmers out of business and led many others to incur even heavier debt.

Peterson told reporters today that the bill incorporates some changes, suggested by the National Milk Producers Federation, but retains the gist of the program included in a discussion draft he made public in mid-July. It would repeal current price support, direct payment and export subsidy programs, replacing them with a margin insurance mechanism and what Peterson described as a “light handed” approach to discourage production if it exceeds demand. At 44 pages, the revised bill is considerably slimmer than the 95 pages in the July draft.

He said that he and Peterson had lined up several original cosponsors and anticipated that more would join before the bill was introduced. “We have cosponsors from California and the Northeast, good support throughout the country,” he said on a conference call this morning.

“The current system is outdated and outmoded,” he said. “It does not provide a safety net when it’s needed. It is not a good system for managing oversupply that happens – the experience that happened in 2009.” Expressing concerned that a similar downturn may happen next year, he added, “If we haven’t updated the system, we’re going to have serious problems.”

“I guarantee you there will be no help from Congress if the dairy industry gets in trouble,” he said. “All these groups that are wanting to have the perfect solution, in their minds, they’re playing with fire here. If they screw this thing up and keep this from happening, they’re on their own when this thing collapses. I’m not inclined to get excited about it. They had their chance.”

“If we have another crisis like we had in 2009, when milk prices dropped and input costs skyrocketed, I fear we could lose half our dairies,” he said in a news release. “The dairy safety net did not work then and it won’t work if similar events occur now.”

Peterson dismissed criticisms by the International Dairy Foods Association, which represents milk processors, that the bill would hamper exports and innovation. “A lot of those guys are guaranteed a profit” through manufacturing margins established under milk marketing orders, “and they complain? We’re trying to move this to more market orientation. Now they’re coming up with other kinds of bogeymen. I don’t have a lot of sympathy for a lot of this nonsense.”

“We don’t think this stunts the industry,” he said. “This is very light handed. It focuses on moving products into exports, not some government storage. This moves us significantly in the direction of market orientation. This is where we have to go. We have protected this industry, probably too, much over the years. This is not complete deregulation but it moves us that way.”

The Congressional Budget Office has estimated that the legislation would save $131 million over the next 10 years in dairy spending that it otherwise estimates at $672 million. He said the bill would be “the most significant change in dairy policy that’s happened since . . . forever, I guess.”