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Veteran Ag Economist Echoes IDFA, Industry Calls for Dairy Reform

Sep 25, 2006

Veteran Ag Economist Echoes IDFA, Industry Calls for Dairy Reform

Dr. Ron Knutson, a veteran agricultural economist, urged members of Congress to reform dairy and sugar programs in the next Farm Bill during a congressional hearing last week in Washington, D.C. Rep. Jerry Moran (R-KS), chairman of the House Subcommittee on General Farm Commodities and Risk Management, convened the hearing to gather evidence on federal farm policy.

At the hearing, five university agricultural economists discussed the role that farm economics will play in shaping the next farm bill. In his testimony, Knutson, who is professor emeritus and former director of the Agricultural and Food Policy Center at Texas A&M University, highlighted the conflict posed by current dairy policies and pressed for a more consistent approach.

"The combination of milk price supports and Milk Income Loss Contract (MILC) payments lacks economic consistency and logic," Knutson told the subcommittee members. "The dairy support program has a history of being plagued by large CCC purchases, stocks and the need to dispose of them through feeding programs, as animal feed, or through the Dairy Export Incentive Program (DIEP)," he added, referring to the U.S. Department of Agriculture's (USDA) Commodity Credit Corporation (CCC). "This experience has been aggravated further by the MILC."

The Milk Income Loss Contract program is a second dairy subsidy program that pays some producers when prices are low. USDA has found that it causes overproduction and distorts the markets. Knutson called for the elimination of either the price support program or MILC, saying more consistent policy would reduce trade distortion, help CCC to manage storage and cost issues, provide consumer price benefits, expand international trade and create a more transparent pricing process.

"Recent experience and studies clearly suggest that U.S. dairy farmers producing a majority of the milk production are able to compete internationally. Dairy programs need to be adjusted to this reality," Knutson said.

"Recognition of the conflict between the two current dairy subsidy programs is growing, not only in Washington, D.C., but among economic experts, USDA, producers and processors throughout the country," said Chip Kunde, IDFA senior vice president. "Dr. Knutson gave a compelling message to Congress, saying we need policies that will remove market impediments and pave the way for global progress."

At the hearing, Knutson also called for "long overdue" revisions to the country's sugar policy.

A veteran agricultural economist, Knutson has spent more than 40 years as a policy analyst and served as both an economist and administrator at USDA.

The subcommittee will continue to gather feedback from a variety of organizations and individuals involved in agricultural production throughout the remainder of the year. Click here to read witness testimony from this hearing.

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Posted September 25, 2006

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