Minnesota Congressman Collin Peterson is working on a plan that he hopes will make the milk industry more profitable and less reliant on federal subsidies.
The ranking Democrat on the House Agriculture Committee says there are three main components to his yet-to-be introduced proposal. First, it would eliminate a pair of rarely used federal programs designed to help dairy farmers in hard times. Second, it would bolster an insurance-like program in which the government pays farmers when milk profit margins narrow.
And, the government would limit how much milk is produced, when profits fall to a certain level.
The last measure is the most controversial. When the difference between milk prices and the cost of production as determined by feed prices falls to a certain level, farmers will be limited in how much milk they can produce. Income from any surplus production would largely go to the government, which would then buy up the excess.
Some dairy producers support the Peterson proposal, saying it would help eliminate the volatile price swings that have challenged producers. The National Milk Producers Federation praised the plan as a way to tweak production so supply and demand can quickly adjust.
But others say the incentives represent unwelcome government interference. Some farmers object to Peterson’s ideas worrying as small-business owners they could be told how much milk they can sell. The International Dairy Foods Association agrees. The group that represents dairy processors including those who make cheese, ice cream and fluid milk, says the measures could take control away from farmers.
The Washington, D.C.-based group does, however, favor the part of Peterson's proposal that works like an insurance system. Dairy producers would pay premiums in good times that would enable them to collect more government payouts in bad times. If they chose to pay nothing, they would get a minimal subsidy.
The dairy crisis started when milk prices plummeted from a high of $18 per hundred-weight in 2008 to about $12 in 2009. Farmers began slaughtering their cows to try to cut production. At one point, an average of 50,000 cows a week, were being destroyed in an effort to reduce the milk surplus and hundreds of dairy farmers were forced out of the business.
While the current farm bill expires in 2012, Representative Peterson is expected to introduce his plan to Congress as a separate measure in a few weeks.