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Dairy avoids going over the cliff

By Janet Kubat Willette

Date Modified: 02/05/2013 4:20 PM

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The passage of fiscal cliff legislation, including the extension of the dairy program, kept the nation from going off the dairy cliff.

Under permanent agricultural law of 1949, which would have went into effect on Jan. 1 absent the legislation, the secretary of agriculture would have had to put out bids for butter, powder and cheese at a level to support 75 percent of parity.

The government would become a competitor to consumers and the regular market, driving up the cost of dairy products, said Patrick Lunemann, president of the Minnesota Milk Producers Association and a Clarissa dairy farmer.

The market would have to react to those prices and the government would have to find a place for those products. The export market would probably be lost totally, he said. Today, about 13 percent of the nation's dairy products are exported. It would also cause havoc in the domestic market.

The government used to purchase dairy products and store them in caves. Today, the government buys little dairy product and the market works, Lunemann said.

He said the extension of the 2008 farm bill "is better than reverting to the 1949 permanent law, which is why Congress extended the farm bill, but it is not as good as if we had a new farm bill in place for the simple reason that the safety net under the 2008 extension isn't as good — I don't believe it's as good – as what was in the five-year bill."

The Milk Income Loss Contract program in the 2008 farm bill has been good for dairy producers in Minnesota and the upper Midwest, Lunemann said.

The Farm Service Agency makes MILC payments on a monthly basis when the Boston Class I milk price falls below $16.94 per hundredweight as adjusted by the dairy feed ration adjustment. There is also a cap on production eligible for the payment.

Minnesota Milk was in favor of the margin insurance portion of the dairy program in the five-year farm bill. The organization said it was an improvement over the dairy price support program. They did, however, have reservations about the supply management portion of the proposal.

They were disappointed the bill didn't even come up on the House floor.