When Congress last passed a five-year farm bill, it created a new economic safety net for dairy farmers. The result has been a net loss for Wisconsin.
That’s why the next farm bill, to be assembled this year, should include a new plan to protect the dairy economy from low prices and maintain affordable dairy products for consumers. That’s also why Wisconsin dairy farmers, processors and federal lawmakers should do a better job than five years ago of leading the policymaking decisions.
The No. 1 cheese-producing and No. 2 milk-producing state deserves influence. But without representation on either the Senate or House Agriculture committees, Wisconsin is at a disadvantage. State dairy groups and politicians should reach agreement on specific solutions and take their case to Agriculture Secretary Sonny Perdue and Congress to ensure the new farm bill suits America’s Dairyland.
At issue is the dairy margin protection program. It works like insurance. Coverage for catastrophic conditions is free, subsidized by taxpayers, beyond a $100 enrollment fee. A farmer can pay a premium for better coverage. In return, the program pays the farmer when the price for the farm’s milk fails to provide a margin above what the farmer pays for feed. The margin covered depends on the insurance purchased.
The program fits the theme of the 2014 farm bill, which replaced direct government payments to farmers with insurance programs to guard against price and weather-related calamities. Generally, the new approach was a good idea. It allowed farmers to produce more for markets and less for government checks, with modest savings for taxpayers.
But the dairy program flopped. During the first two years, farmers paid $96 million in premiums but received only $12 million in payments. That would have been understandable in good times, but times have been anything but good for dairy farmers. The average price for all milk fell 40 percent from 2014 to 2016.
Among the reasons the program failed was it used a one-size-fits-all cost estimate for feed. It also lacked the revenue insurance available for crop farmers. Furthermore, it was not equipped to deal with the underlying problem of an imbalance in supply and demand. The 2014 bill originally included a supply management plan, which Wisconsin was instrumental in getting removed. That plan would have penalized efficient farmers for expanding production. But without some production control, farmers are dependent on finding more markets.
Congress laid the groundwork for a new dairy program when it recently passed the two-year budget deal that averted a government shutdown. Improvements in dairy margin protection were added to the budget bill, with help from Wisconsin’s congressional delegation. The changes also paved the way for Congress to add money to the dairy program in the new farm bill. The program’s budget line was $50 million a year, plus premiums, in a total farm bill of nearly $100 billion a year, about 80 percent of which is spent on food stamps and related programs.
But how Congress will change the dairy program remains unknown. Regional differences in farmers’ costs and markets are likely to cause a tug-of-war over specifics, reminiscent of 2014, when the dairy provision was the last bit of the farm bill that Congress agreed on.
The stakes are high for Wisconsin, where the dairy industry industry employs about 80,000 people and provides $7.2 billion in income. As crop farmers prepare and plant their fields this spring, Wisconsin dairy farmers and lawmakers should prepare and plant policy seeds that will lead to a better farm bill harvest this time.
By: Wisconsin State Journal editorial board
Source: Wisconsin State Journal