Dairy Policy & Economics
July 10, 2012
The Truth About the Goodlatte-Scott Amendment
(Washington, D.C. – July 10, 2012)
Goodlatte–Scott Offers Free Catastrophic Coverage
The amendment provides margin protection for farmers when margins drop below $4 at no cost for the first 4 million pounds of production. With nearly 90 percent of all dairy farms’ production under 4 million pounds, the amendment effectively provides catastrophic coverage to the majority of farmers at no cost. Margin coverage under $4 for over 4 million pounds of production will cost only $0.03.
Goodlatte–Scott Helps Balance Our Budget; Does Not Increase Costs to Taxpayers
According to the Congressional Budget Office, the amendment will save $47 million over 10 years, more than the bill’s $38 million. It allows market forces to provide incentives to balance supply and demand, instead of imposing a new burdensome government program that will reduce producers’ incomes to limit milk supplies and increase costs to consumers.
Goodlatte–Scott Rejects Growth Management for the Dairy Industry
The “growth management” program in the bill, called stabilization, will hamstring the industry by limiting milk supplies and harming dairy exports. The amendment eliminates that program. Under the amendment, there is no restriction on producers’ ability to produce and market milk at any time, and a producer’s production history is calculated in the same way as base coverage under the bill. In addition, producers can annually select the margin level and percentage of production history covered.
Goodlatte–Scott Covers up To 80 Percent of Every Dairy Producer’s Production History
The amendment offers the same catastrophic coverage at the $4 margin level at up to 80 percent of production history up to 4 million pounds of production as does the bill.
Goodlatte–Scott Allows Annual Producer Selection of Margin Insurance Coverage
The amendment specifically states “that at the time of registration of a dairy producer in the margin insurance program . . . and ANNUALLY THEREAFTER under the duration of the margin insurance program, an eligible dairy producer may purchase margin insurance.” Producers are further allowed to select a coverage level in any increment of $0.50 with a minimum of $4 and a maximum of $8 and a percentage of coverage between 25 percent and 80 percent of production history.
Goodlatte–Scott Helps Dairy Farms of All Sizes
Small farmers have exactly the same access to $4 margin coverage under the amendment as under the bill. In addition, premiums at levels of margin coverage up to $7 are less expensive under the amendment for farms up to 4 million pounds of production. Under the amendment, no farmers of any size will lose revenue due to the operation of the stabilization program.
Goodlatte–Scott Trusts Producers to Manage Price Volatility
The amendment provides dairy producers the tools to manage price risk without requiring government intervention into markets, at a lower cost to taxpayers as well as consumers. Supporters of milk supply management programs want government, and not dairy markets, to intervene in both the supply of farm milk and the demand for dairy products in order to achieve a higher milk price.
Numerous studies have shown that consumer milk prices follow farm milk price movements. This was confirmed last month by a paper authored by Dr. Andrew Novakovic of Cornell University.
Goodlatte–Scott Reduces Food Costs for Consumers and Government Programs
The Consumers Union, Consumers Federation of America, Consumer Action and National Consumers League all oppose supply management programs because they “increase milk and dairy product prices for consumers.” As a result of higher dairy prices, government nutrition programs, like SNAP and WIC that are already facing budget cuts, will face significantly increased costs or will be able to serve fewer people due to the stabilization program that is eliminated by the amendment.
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