House Farm Bill dairy provisions mostly similar to Senate version

By Charlie Garrison, The Garrison Group
The Dairy Subtitle in the House Agriculture Committee's Discussion Draft of its farm bill is similar to the language in the bill passed by the Senate last month.  It contains both the Dairy Producer Margin Protection Plan (DPMP) and the Dairy Market Stabilization Plan (DMSP), it extends the farmer-funded dairy promotion and research program, forward contracting for Federal Milk Market Order Classes II, III and IV and the Dairy Indemnity Program.  The House draft would eliminate the Milk Income Loss Contract (MILC) Program, the Dairy Product Price Support Program (DPPSP), the Dairy Export Incentive Program (DEIP) and the FMMO Commission established by the 2008 Farm Bill.
The DPMP uses the National All-Milk Price minus a national feed cost calculation to establish the margin levels for the insurance program.  Margins are calculated monthly by USDA and insurance payments would be made to participating producers if the margin average for a specific two-month period is below the level of coverage chosen.  Basic margin insurance of $4 on up to 4 million pounds of milk is provided at no out-of-pocket cost.  Supplemental insurance can be purchased in 50-cent increments up to $8.  Basic margin insurance covers up to 80% of a producer's base while supplemental insurance can be purchased on between 25% and 90% of the base.  The highest of the last 3 calendar years' production is the fixed base for the duration of the farm bill in the basic program and the prior year's production is the base for supplemental insurance that can be purchased annually.  Administrative fees from $100 to $1,000 apply depending on the volume of milk marketed annually.  Producers who sign up for DPMP are required to participate in DMSP.
The House Agriculture Committee's bill offers producers the opportunity to sign up for retroactive margin insurance for the period between the date the bill goes into effect and completion of USDA rulemaking for the new program.  The Senate bill extends MILC to provide a safety net for producers while the rules are being written.
The DMSP is in effect after two consecutive months of margins below $6 or one month below $4.  If the margin is below $6 a participating producer is paid for either 98% of base or 94% of total marketings.  If the margin is between $5 and $6 payment is for 97% of base or 93% of total marketings.  If below $4 the producer is paid for 96% of base or 92% of milk marketings.  The House bill would exempt producers who market at or below base from any reductions in payment for milk.  The program would be suspended after two consecutive months of margins above $6.  The program would also be suspended if the relationship between U.S. and world prices for Cheddar cheese and nonfat powder are such that significant increases in imports or decreases in exports could result.
Overall the House Agriculture Committee says the bill saves more than $35 billion in mandatory funding over a decade, repeals or consolidates more than 100 programs, ends direct payments, streamlines and reforms policy and programs for more than $14 billion in savings, saves more than $16 billion from the Supplemental Nutrition Assistance Program (SNAP or Food Stamps), consolidates 23 conservation programs into 13 and includes language barring the EPA from requiring permits for the application of already-approved pesticides near water.
The House Agriculture Committee is scheduled to begin debate on its Federal Agriculture Reform and Risk Management Act (FARRM) on Wednesday July 11.