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Farm Bill to Rise from Supercommittee’s Ashes

December 1, 2011

Often times, the wheels of government hardly turn at all…until an emergency appears, and then suddenly they spin like crazy to get traction. Such has been the case in Washington regarding farm policy, where a process that could have taken years has been accelerated into a period of a couple months. The threat of shrinking federal budgets has been the torque to prompt our legislators to make hard, necessary and prudent choices about the future.

By all appearances, it looks like the next Farm Bill essentially has been drafted, in a very focused fashion. And that means that regarding dairy policy, a lengthy journey is nearer to completion…even while we can’t (to mix metaphors) count our chickens before they’re hatched.

The federal budget crisis has been the dominant theme in Washington this year. Every decision made, every proposal offered, has been shadowed by the need to align spending with priorities, and shrinking resources. Because the choices have become so tough, Congress as a whole delegated the really hard decisions to the special 12-person supercommittee, appointed earlier this year.

It’s now obvious that the supercommittee effort has failed to live up to expectations. The six Democrats and six Republicans on the panel struggled in vain to agree on a mix of $1.2 trillion in revenue enhancements and spending cuts. But even if that larger process didn’t pan out, an enormous, bipartisan agreement was achieved was in the area of agricultural programs that will bear real fruit.

The credit for that development goes to the leaders of the House and Senate agriculture committees, who sensed that this extraordinary budget pressure was both a threat and an opportunity. While existing farm programs certainly are threatened by the need to generate budget savings, the workings of the supercommittee also have offered an opportunity to make some sweeping changes. Sensing that a planned, methodical reduction in spending is preferable to an indiscriminate haircut, the House and Senate ag committees didn’t let this crisis go to waste.

What that means for dairy policy is that the benefits of NMPF’s Foundation for the Future program have risen to the fore. As I’ve written previously in this space, the FFTF offers a better safety net for dairy producers, while it reduces the dairy budget 20%, or $131 million, compared to the current Farm Bill. Rarely is a budget cut simultaneously both good policy and good politics, but in this case, it is. These budget savings are the right fiscal medicine, at the right time.

It’s important to acknowledge that Foundation for the Future has evolved into the Dairy Security Act, and that NMPF’s initial proposal has changed in important and beneficial ways. Most critically, the proposal now offers farmers a choice between the protections of a government safety net, and the prospect of a completely free-market approach with essentially no government support at all.

Those who choose the first option will be subject to the Market Stabilization program so that they can help reduce milk production during times when markets are out of kilter, and margins are poor. Those who want some help from the government will be expected to be part of the solution. But those who don’t believe in such an approach will not be mandated to be part of it. There’s no free lunch, and this program reflects the new reality of a government with limits. Current dairy programs, including the MILC, the dairy product price support program, and the Dairy Export Incentive Program, will be eliminated. None of these individually, or even together, are as an effective a safety net as the new Dairy Security Act will be.

The Dairy Security Act isn’t about raising farm-level prices, but about helping prevent the hemorrhaging of dairy farmers’ equity when their margins are severely compressed. After all, the farmer’s share of the consumer’s dairy dollar is only about 30 cents anyway, and retail prices often don’t reflect changes in farm prices anyway. 2009 was an example of that, when processors recorded record profits, and farmers suffered record losses.

So supercommittee effort may be D.O.A., but its legacy is an agreement for how to save $23 billion in farm program spending in the next decade. The fiscal forces bearing down on the agriculture committees in the House and Senate have produced a series of carefully calibrated compromises and trade-offs. Pressures in Washington to cut spending generally, and farm programs in particular, are not going to abate. And the ag committee members, having just trod this path, will be loathe to walk away from this deal regardless of when the next Farm Bill actually gets passed.