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Study: Dairy Amendment Less Costly Than Farm Bill Proposal

Study suggests Farm Bill policy benefits larger farms, would cost farmers more

Published on: Jun 19, 2013

A study from a Cornell University professor comparing the Farm Bill Dairy Security Act proposal with the amendment offered by Reps. Bob Goodlatte, R-Va., and David Scott, D-Ga., finds that the DSA would be more costly than the amendment.

The study, "2013 Farm Bill Dairy Title Proposal Redistributes Program Benefits toward States with Larger Farms," written by Cornell University Professor Joshua Woodard, also finds that the currently proposed Dairy Security Act is significantly weighted to benefit large farms.

According to the report, the government loss ratio is higher for the DSA proposal than for the alternative amendment. The expected loss ratio is the ratio of expected payments divided by premiums.

Cornell study suggests Farm Bill policy benefits larger farms, would cost farmers more
Cornell study suggests Farm Bill policy benefits larger farms, would cost farmers more

For $4.50 margin coverage, the expected loss ratio is 20.56 for DSA, versus 6.71 for DFA, the report states.

While both the Dairy Security Act and the Goodlatte-Scott proposal will replace the current Milk Income Loss Contract program with a new margin insurance program for producers, only the DSA adds a Dairy Market Stabilization Program that would require dairy producers to idle production in response to market drivers or take a milk check deduction.

"The implication of the (DMSP) would be further government flows towards regions dominated by larger producers – many of which are in the process of contracting production growth – at the expense of consumers, taxpayers and regions dominated by smaller producers," the study explains.

Similarly, the International Dairy Foods Association, supporter of the Goodlatte-Scott amendment, says eliminating the DMSP would cost taxpayers less and benefit smaller farmers.

But the National Milk Producers, which supports the DSA in the Farm Bill as it stands, says the Goodlatte-Scott proposal to eliminate the DMSP would "remove the cost control mechanism from (the DSA), greatly increasing government and taxpayer costs."

"It's dairy farmers who have expressed genuine interest in limiting the costs of farm programs, unlike processors, who have no real stake in limiting government costs, and stand to benefit by creating a surplus of milk that puts farm families out of business," NPMF CEO Jerry Kozak said.

According to IDFA, the study affirms previous findings by the Congressional Budget Office and refutes a study from the University of Missouri.

Read more about the Dairy Security Act:
Report Shows Positive Impacts of Dairy Security Act
Dairy Groups Disagree Over 2012 Farm Bill
Farm Bill Remains A Priority For Milk Producers
Group Touts Dairy Security Act for Next Farm Bill