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Coalition Opposes Farm Bill Extension of Dairy Price Support Program A coalition of six taxpayer advocacy groups led by the National Taxpayers Union has voiced opposition to the extension of the Dairy Price Support Program as included in the House version of the 2007 Farm Bill, passed in July. The coalition's dissent comes amid fresh debate in the industry over whether the continuation of such dairy programs will run afoul of World Trade Organization (WTO) agreements. IDFA shares these concerns.Last week, the taxpayer groups sent a letter to Senator Tom Harkin (D-IA), chairman of the Senate Agriculture Committee, and Ranking Member Saxby Chambliss (R-GA), urging them to oppose efforts to expand the Dairy Price Support Program when the Senate begins debate on the Farm Bill in the coming weeks. The letter charged that the program, which would "raise consumer costs and government expenditures but offer minimal support to producers," should be allowed to expire. Adding to the controversy, the House-passed version of the Farm Bill would replace the $9.90 minimum milk price with specific purchase prices for butter, nonfat dry milk powder and cheese set in law. Historically, the U.S. Department of Agriculture (USDA) has regulated these dairy product prices, giving the agency flexibility to minimize government costs while supporting a manufacturing price at no less than $9.90 per hundredweight on average. Proponents of the purchase price change, including the National Milk Producers Federation, argue that supporting the individual prices for butter, powder and cheese makes the price support program more trade-compliant, because it would reduce reported dairy subsidies to the World Trade Organization. The Dairy Price Support Program currently contributes $4.5 billion, or 32%, of the allowable trade-distorting support the U.S. can provide for all agriculture under WTO agreements. According to some trade press reports, setting the program's purchase prices in law could significantly reduce the amount of dairy subsidies reported to the WTO. But other trade experts argue that this change to the program could make U.S. trade negotiations and WTO compliance more complicated, because the price of butter, powder and cheese underpins USDA's federal order minimum milk prices. As the taxpayer coalition notes in its letter, setting product-specific support prices in law "effectively puts a price floor under all milk, because dairy commodities are used in USDA's classified pricing system to set minimum fluid milk prices." To read the coalition letter, click here.
Posted September 4, 2007
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