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Economists Review Impact of Proposed Farm Bill on Dairy

May 09, 2012

Two dairy economists recently released intriguing reports on the dairy provisions of the 2012 Farm Bill issued last month by the Senate Committee on Agriculture, Nutrition and Forestry. The reports indicate that dairy stakeholders may not be getting their fair share of Farm Bill outlays and that the Dairy Market Stabilization program included in the Farm Bill would have limited the milk supply to processors nearly one-fifth of the time over the last five years.  

Andrew Novakovic is the E.V. Baker professor of agricultural economics in the School of Applied Economics and Management at Cornell University. Mark Stephenson is the director of dairy policy analysis at the University of Wisconsin. Together they provide an Information Letter series and occasional briefing papers on dairy policy developments for educators and industry.

The Challenge of the Congressional Dairy Baseline

In "The Challenge of the Congressional Dairy Baseline," Novakovic notes that dairy's share of gross farm cash receipts projected for the next 10 years is 24 percent, yet the projected share of government spending for dairy is "virtually undetectable" at 0.1 percent.

"As Congress continues to look for that fair balance that levels the playing field, participants in the dairy industry could understandably question whether or not they are getting their fair share and just how much of their current, small baseline they should give up for the greater good," Novakovic said. 

An Estimation of Farm-Level Impacts

In "Dairy Provisions of the Senate Agriculture Reform, Food and Jobs Act of 2012 – An Estimation of Farm-Level Impacts," Stephenson and Novakovic review what might have been had the supply management program included in proposed Farm Bill been in place from 2007 to 2012.

The report shows that the Dairy Market Stabilization program, which mandates supply management, would have been active for 16 months during January 2007 through December 2012. That means the program would have been active about 19 percent of the time.

"This frequent interruption of free markets is more than double the amount of time that was mentioned by Scott Brown at the House subcommittee hearing in April," said Jerry Slominski, IDFA senior vice president of legislative and economic affairs.

Brown, assistant research professor at the University of Missouri, had estimated that the supply management program would be triggered only 7.5 percent of the time.

IDFA continues to oppose milk production limits and supports proven safety-net programs, such as revenue insurance, that are typically used for other commodities. Read "IDFA Dairy Policy Recommendations: Providing a Path to Growth and Opportunity" for details.

For more information, contact Slominski at jslominski@idfa.org.

 
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