By NICOLE GAUDIANO, Gannett Washington Bureau
WASHINGTON -- A battle pitting dairy producers against processors will play out on the House floor as early as Wednesday as lawmakers debate a controversial proposal to limit the supply of milk when there's too much on the market.
Many Vermont farmers support the proposal, which they say would reduce the market volatility that has put so many of them out of business. Some helped build a national coalition to push for its passage as part of the next farm bill.
"It's a very small piece of the farm bill but we feel it is important to our survival," said Amanda St. Pierre, owner of Pleasant Valley Farm in Berkshire, Vt. "This is a very big change from what we have today. I would argue today isn't working for us, for farms of all sizes."
But farmers have a powerful opponent in House Speaker John Boehner, R-Ohio, who has said the provision would make a "Soviet-style" dairy program worse.
Other opponents of the milk proposal say it would raise prices for consumers, slow the dairy industry's growth, make the industry less competitive globally and bring unwanted government intrusion.
House lawmakers could vote Wednesday on an amendment by Reps. Bob Goodlatte, R-Va., and David Scott, D-Ga., that would strip the provision from the farm bill.
"The reforms in the amendment will give farmers the necessary tools to manage their risk without requiring them to participate in yet another government program, keeping dairy prices affordable for consumers and businesses," Goodlatte said in a statement.
The Dairy Security Act is part of a $939 billion farm bill that would reauthorize most farm, nutrition assistance, rural development and agriculture trade programs for the next five years. A separate bill, including the dairy provision, passed the Senate on June 10.
Both the Dairy Security Act and the Goodlatte-Scott amendment would replace price supports and direct payments to dairy farmers with a voluntary profit-margin insurance program for producers that would guarantee revenue during times of low farm milk prices and high feed costs.
But the Dairy Security Act would require that participants reduce their milk production when there's an oversupply of milk in the market. If the farmers choose to overproduce, they won't receive federal payments for a portion of their milk.
Farmers tend to overproduce when prices fluctuate, hoping to make more money when prices are high and cover their costs when prices are low. The goal of the Dairy Security Act's supply management plan, called the Dairy Market Stabilization Program, is to keep farmers from saturating the market with milk, which could prolong depressed prices.
"If you have a blank check for the dairy producers in this country, you'll have such a mountain of cheese and powder that you won't be able to see beyond it," said Bill Rowell, co-owner of Green Mountain Dairy Farm in Sheldon, Vt. "The idea is to supply the market what it needs for a fair and consistent price."
The Goodlatte-Scott approach, which would strip the supply management feature, would cost $15 million less over 10 years, according to the Congressional Budget Office.
The amendment is supported by the International Dairy Foods Association, which represents processors like Dean Foods, along with food processor, restaurant, retailer and consumer groups and some dairy farmers who worry supply management would hurt their growth.
"When you increase the input costs of all products, those costs are going to be passed on to consumers," said Jerry Slominski, a senior vice president at IDFA. "Everyone benefits from lower prices for dairy products. It's good for the entire industry."
But the National Milk Producers Federation, which supports supply management, says any temporary increase in price that farmers would be paid for milk wouldn't result in a discernible change for consumers or government food assistance programs. Because it wouldn't limit supply, the Goodlatte-Scott amendment could cost taxpayers billions during prolonged periods of depressed prices, supporters say.
"This is bad for farmers, for certain, but it's also bad for taxpayers, because they are on the hook for higher and more frequent insurance payments when margins are poor," said Chris Galen, a federation spokesman. "Of course, processors like low milk prices, because it allows them to buy milk for cheap, but history shows that lower farm level prices don't always get passed on to consumers."
Members of the House Agriculture Committee voted 26-20 against the Goodlatte-Scott amendment, but it could have more success on the floor. Though Boehner has said he would ultimately vote for the farm bill, he has said he would support the amendment.
"This is going to be a battle royal," said Rep. Peter Welch, D-Vt., who has been working for months to gather votes to defeat the Goodlatte-Scott amendment. "It's very tough to beat the speaker on the floor, but that's our job. Mainly this is going to be an argument on the merits about why this is good for the farmer and taxpayer."
Vermont's congressional delegation has been pushing for a supply management program for years. So have Vermont farmers like Rowell, who has traveled across the country talking to industry leaders and testifying in Washington before the House and Senate agriculture committees.
Rowell said current policy does nothing to address a receding market, which proved disastrous for farmers in 2009. Back then, milk prices collapsed and feed costs skyrocketed as global demand for dairy products declined, producing the worst squeeze on margins since the 1970s. Federal intervention couldn't stop the crisis from pushing farms into the red.
He and other Vermont farmers formed a group called Dairy Farmers Working Together and worked to build a national coalition around the idea of reducing market volatility.
"If we continue as we have for the past two generations, we're simply going to continue losing farm numbers," Rowell said. "In 1970, we had 648,000 dairy farms in this country. Today, we have less than 49,000 remaining, yet those farms continue to produce an increasing supply of milk each year."
St. Pierre said supply management is a "critical tool" for farmers. Knowing she wouldn't have to sell her milk at a loss for, say, 10 months of the year would help, she said. Right now, she can't guarantee that.
"If we're all taking a little responsibility and being more responsive to the demand of the market, it's going to help my son take over our farm for the next generation," she said.