Senate legislation could lead to big increase in dairy support program

WASHINGTON -- Taxpayers would fork over more money for a dairy support program under the Senate version of the farm bill -- but they could help offset that by drinking more milk.

WASHINGTON -- Taxpayers would fork over more money for a dairy support program under the Senate version of the farm bill -- but they could help offset that by drinking more milk.

That's because the Milk Income Loss Contract program, known as MILC, pays dairy farmers cash when milk prices fell below certain levels. When demand is up, prices tend to be up, too.

The program, which is aimed at helping small and midsize dairy farmers weather low prices, is currently limited to the first 2.4 million pounds of milk per year, which translates to about a 120-cow farm.

The Senate farm bill raises that cap to 4.15 million pounds, or roughly 200 cows.

The legislation also increases the size of the payment that farmers receive when prices fall below a baseline level -- from 34 percent of the difference to 45 percent of the difference -- restoring it to a level it had been at a couple of years ago.


A watchdog group called the program, which is funded by taxpayer dollars, a waste of money.

"We're supporting industries that shouldn't necessarily be operating if they can't sell their milk at market prices," said Demian Moore, a senior policy analyst at Taxpayers for Common Sense. "It's time to figure out another way to do things."

Because milk prices have been high in recent months, there haven't been any payments made under the MILC program since February.

Without the proposed increases, the program is projected to cost $1.27 billion over the next five years, although that figure could drop if milk prices stay high. The Senate, which takes up the farm bill this week, would boost that by $441 million over five years if the proposed increases are adopted.

The program has support among dairy farmers in the Midwest and Northeast, home to small and medium-sized dairy farms. But dairy farmers in Western states oppose it, saying it does little to help their large operations because of the cap -- even with the higher one in the Senate bill.

According to U.S. Department of Agriculture statistics, Wisconsin dairy farmers have benefited more than any other state over the last two years, receiving $104 million, followed by California ($53 million), New York ($46 million), Pennsylvania ($41 million) and Minnesota ($39 million).

By increasing the cap from effectively 120 cows to 200 cows, the program would go from topping out at below the national average to quite a bit above it. The average dairy farm has about 150 cows, according to the National Milk Producers Federation.

The Midwest Dairy Coalition, which had urged the Senate Agriculture Committee to adopt a "modest increase" in the cap, said it was comfortable with the jump endorsed by the Senate Agriculture Committee.


"That's still well targeted to small- and medium-sized producers," said the group's Washington representative, Steven Etka. "Over the last five years, we've seen some growth in herds, and we've seen some increased productivity."

Farmers and politicians from western states, home to much larger dairy operations, said the increase in the cap will do little to win them over. Sen. Mike Crapo, an Idaho Republican who serves on the Agriculture Committee, said through a spokeswoman that he still opposes MILC.

"This program is not a good use of taxpayer dollars," Crapo said.

The increase was sought by Sen. Patrick Leahy, a Democrat from Vermont, a state that prides itself on small family farms.

"Dairy prices have improved, but farmers are just a market cycle away from hard times," Leahy said in a statement. "Our farmers need to know that the MILC program's safety net will be there when they need it."

According to Leahy's office, 90 percent of the nation's dairy farmers would be fully covered under the increased limit, up from 79 percent under the current cap.

The USDA opposes increases in the MILC program. While the Senate farm bill proposes raising the percentage from 34 percent to 45 percent, the department proposes decreasing that percentage gradually over the next several years, bottoming out at 20 percent by 2013.

"That was an effort to maintain some safety net, without distorting markets or production decisions," said John Johnson, deputy administrator for farm programs for the department's Farm Service Agency.


As for the increase in the amount of milk produced that's eligible for the subsidy, Johnson said, "That's going in the direction of making farmers more dependent on government


But Sen. Norm Coleman, a Minnesota Republican who pushed for the provision on the Agriculture Committee, said there was more to the debate than cold economics.

"You've got ag economists who simply run this by the numbers, and from their perspective, if everything were the size of Wal-Mart in agriculture, that's all we would need," he said. "These dairy farms are part of the lifeblood of the communities. They're part of the economic vitality of rural Minnesota. In states like Minnesota, Wisconsin, Vermont and Pennsylvania, they're part of the fabric of the community."

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