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Dairy Facts 2016

Price Fixing Milk

Jun 19, 2013

Price Fixing Milk
A bipartisan bill to help giant dairy producers and punish consumers.

Washington's dairy policy is such a mess that even Congress would be hard pressed to make it worse, but Minnesota Democrat Collin Peterson and a few Republicans are trying.

As ranking Democrat on the House Agriculture Committee, Mr. Peterson is the guardian angel of his state's giant Land O'Lakes dairy co-op. The House will vote Wednesday whether to retain his latest farm-bill gift to milk producers in the form of a new Soviet-style supply program to raise prices.

Under the current Milk Income Loss Contract program, the feds track milk prices and pay producers when prices fall below target levels. At least this imposes a cap on annual production that is eligible for payment—a limit that upsets owners of large cow herds. Enter Mr. Peterson, who persuaded Republican Frank Lucas of Oklahoma to support a replacement that turns the current subsidy into a revenue-insurance program. Dairy producers will purchase this insurance, and if prices fall below the target level they will receive payments up to amounts insured.

The catch is that Mr. Peterson uncapped the program—opening it to giant producers. Knowing this could trigger vast payments and political blowback, Mr. Peterson created yet another program—this one putting government in charge of milk supply and prices.

Under this Dairy Market Stabilization Program, if prices fall below target levels, dairy producers who participate in the insurance program can only be paid for at most 98% of their base milk production. The idea is to force producers to quickly cut supply, pushing prices higher and limiting government payments. The USDA will also swoop in to buy more dairy products. The goal is to keep dairy prices artificially high, which means higher costs for consumers and federal nutrition programs. Americans will subsidize dairy farmers as taxpayers and again as consumers.

The good news is that Virginia Republican Bob Goodlatte and Georgia Democrat David Scott are offering an amendment to kill the stabilization program, as well as alter the dairy insurance to provide less support for giant producers. This is worse than killing dairy support outright. The U.S. is now a net exporter of dairy products, and the industry doesn't need government help. But Goodlatte-Scott is a vast improvement on Mr. Peterson's price fixing act, a version of which Michigan's Debbie Stabenow added to the Senate farm bill that passed on June 10.

It will be instructive to see if House committee Chairmen Dave Camp and Mike Rogers (both Michiganders like Ms. Stabenow) will buck their state's powerful milk co-op to vote for Goodlatte-Scott. If the House can't kill Mr. Peterson's exercise in crony socialism, Americans will know whom to blame when their grocery bills go up.

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