On Friday afternoon, the Dairy Security Act of 2011 was introduced in the House. Sponsored by Minnesota Rep. Collin Petersonand Idaho Rep. Mike Simpson, the act has come following a string of turbulent years in the dairy industry alongside numerous congressional hearings and attempted regulatory fixes.

According to National Milk Producers Federation, which is pleased with the proposed legislation, the act would:

  • Make voluntary the Dairy Market Stabilization Program, which will help reduce milk output during times of low margins. If producers enroll in the USDA’s subsidized margin insurance program, they will automatically be enrolled in the Dairy Market Stabilization Program. This will provide alerts when additional production may affect overall margins.
  • Extend the “basic” level of margin insurance coverage to 80 percent of a producer’s production history, from 75 percent as initially proposed. The “supplemental” margin coverage option is also improved, as it will allow producers to purchase insurance for growth in their milk production history.
  • Include a refined provision in the Dairy Market Stabilization Program to ensure that it does not activate during times when signals for farmers to reduce production may impinge on the ability of the U.S. to export dairy products.
  • Simplify the Federal Milk Marketing Order pricing system through a formal hearing process conducted by USDA. The proposal directs changes in the way milk used to manufacture cheese (Class III) is priced, from a complicated end-product formula, to a more market-oriented competitive pricing system.

“This is the culmination of a couple years work,” said Peterson, ranking member of the House Agriculture Committee, on Friday morning. “The reason for doing this is the current system is outdated, outmoded and doesn’t provide a safety net that’s (adequate to address the situation) when it’s needed. It’s also not a good system for managing the oversupply that happens from time to time.”

The proposed legislation has a “stabilization component that will allow us to deal with the ups and downs of the export market. It’ll allow us to make sure we don’t have a collapse caused by a one percent oversupply situation. … We must have a way to deal with that and we’ve done it in a fairly light-handed way that makes sense. It’s market-oriented and we don’t believe it will interfere with the export market.”

It would also save money, he said. “The current baseline is $672 million and the Congressional Budget Office score is $131 million in savings over 10 years. … We think that will help us get support however this process moves forward.”  

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Peterson, seeking to avert another round of financial difficulties for dairy producers, pointed to 2009 when there was “a downturn and there was a tremendous toll on the dairy industry – some had to incur debt and some had to exit the business. If we have another downturn like 2009 -- which some are afraid will happen next year – and we haven’t updated the system, we’ll have serious problems.

“So, we’ve worked through this, put out a discussion draft, made changes to that and there will probably be more changes as we go through the process. But today is official start of that process.

“We hope that over this fall we’ll be able to work on this to bring greater consensus, more people on board, as they understand what we’re trying to do and how this will work. I’d like this to move before the farm bill (because) I thought the farm bill would be done later (in 2012). I didn’t think we could wait that long.”

The dairy act’s journey through the legislative process is “dependent on how the farm bill proceeds, which is unclear. We’ll be doing (the farm bill) between now and next September. But no one knows when or how that will work.

“There is a possibility that we can work (the dairy bill) through and get consensus legislatively not only in the House but in the Senate. Then, it could become part of the farm bill process. We need to do the work now. … I’m optimistic we’ll be able to pull everyone together and get this done.”