Current Issues in Dairy Policy Hal Harris, Clemson University ERS Dairy Policy Workshop

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Current Issues in Dairy PolicyHal Harris,
Clemson UniversityERS Dairy Policy Workshop

• Washington, DC
• September 2002

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Dairy Programs in 2002 Farm Bill

• DPSP Extended
• DEIP Extended
• MILC Created (through FY95)

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Other Dairy Provisions

• Promotion Assessment, Imports
• Fluid Milk Promotion
• Mandatory Price Reporting
• Indemnity Payments
• Studies

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Other Provisions

• Conservation, Environment
• Feedgrain, oilseeds
• Energy
• Disaster Relief

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Federal Orders Ignored

• Pooling
• Higher of III or IV
• Number of Classes
• Imports/Exports

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Interrelated Issues

• Support price level
• Program cost
• WTO compliance
• Tilt
• Equity
• Efficiency
• DPSP and MILC?
• Payment Limits

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Support Price Level

• Is 9.90 too high?

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Program Cost

• Is 2.0-3.0 bil/year too high?

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WTO Compliance

• 19 bil Amber Box Limit
• Dairy is Largest Component (4.3 billion in 1998)
• By 2005 Dairy Contribution
• Could Approach 6 bil.

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Tilt

• Little Room to Maneuver

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Equity, Efficiency

• MILC Penalizes Most Efficient Operations, Regions
• Operations With Over 500 Cows Lose Money
  (.20-.30 decline in price)
• Retards Loss of Small Farms

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Farming the Program

• MILC returns 200-300/cow
• You do the arithmetic

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DPSP plus MILC

• Cumulative Effect

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Result

• High Production, Low Prices
• Considerable CCC Purchases
• Higher Program Cost

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Stephensons Irony

• Results of the Program Prove the Need for It!

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Payment Limits

• Crop Farms, Nominally
• Countercyclical 65,000
• Direct 40,000
• Market Loan, LDP 75,000
• 180,000

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• But 3-Entity Rule, Certificates, No Effective
  Limit

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Dairy Limit Per Farm

• 24,000

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• Winners
• Small dairies
• Upper midwest
• Consumers
• Processors
• Losers
• Large dairies (over 500 cows)
• Taxpayers

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Is this policy

• Respected Cornell Dairy Economist