Current Issues in Dairy
Policy
Hal Harris, Clemson University
ERS Dairy Policy Workshop
Washington, DC
September 2002
Dairy Programs in 2002 Farm
Bill
 DPSP Extended
 DEIP Extended
 MILC Created (through FY95)
Other Dairy Provisions
 Promotion Assessment, Imports
 Fluid Milk Promotion
 Mandatory Price Reporting
 Indemnity Payments
 Studies
Other Provisions
 Conservation, Environment
 Feedgrain, oilseeds
 Energy
 Disaster Relief
Federal Orders Ignored
 Pooling
 Higher of III or IV
 Number of Classes
 Imports/Exports
Interrelated Issues
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Support price level
Program cost
WTO compliance
Tilt
Equity
Efficiency
DPSP and MILC?
Payment Limits
Support Price Level
 Is $9.90 too high?
Program Cost
 Is $2.0-$3.0 bil/year too high?
$Millions
CCC Dairy Program Cost
$2,500
$2,250
$2,000
$1,750
$1,500
$1,250
$1,000
$750
$500
$250
$0
-$250
94
95
96
97
98
99
00
01
02
03
WTO Compliance
 $19 bil Amber Box Limit
 Dairy is Largest Component ($4.3 billion
in 1998)
 By 2005 Dairy Contribution
 Could Approach $6 bil.
Tilt
 Little Room to Maneuver
Equity, Efficiency
 MILC Penalizes Most Efficient
Operations, Regions
 Operations With Over 500 Cows Lose
Money ($.20-$.30 decline in price)
 Retards Loss of Small Farms
Farming the Program
 MILC returns $200-$300/cow
 You do the arithmetic
DPSP plus MILC
 Cumulative Effect
Result
 High Production, Low Prices
 Considerable CCC Purchases
 Higher Program Cost
“Stephenson’s Irony”
 Results of the Program – Prove the Need
for It!
Payment Limits
 Crop Farms, Nominally
– Countercyclical
$65,000
– Direct
$40,000
– Market Loan, LDP $75,000
$180,000
 But 3-Entity Rule, Certificates, No
Effective Limit
Dairy Limit Per Farm
 $24,000
 Winners
–
–
–
–
Small dairies
Upper midwest
Consumers
Processors
 Losers
– Large dairies (over 500 cows)
– Taxpayers
“Is this policy”
Respected Cornell Dairy Economist