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

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

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

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  1. Current Issues in Dairy PolicyHal Harris, Clemson UniversityERS Dairy Policy Workshop Washington, DC September 2002

  2. Dairy Programs in 2002 Farm Bill • DPSP Extended • DEIP Extended • MILC Created (through FY95)

  3. Other Dairy Provisions • Promotion Assessment, Imports • Fluid Milk Promotion • Mandatory Price Reporting • Indemnity Payments • Studies

  4. Other Provisions • Conservation, Environment • Feedgrain, oilseeds • Energy • Disaster Relief

  5. Federal Orders Ignored • Pooling • Higher of III or IV • Number of Classes • Imports/Exports

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

  7. Support Price Level • Is $9.90 too high?

  8. Program Cost • Is $2.0-$3.0 bil/year too high?

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

  10. Tilt • Little Room to Maneuver

  11. 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

  12. Farming the Program • MILC returns $200-$300/cow • You do the arithmetic

  13. DPSP plus MILC • Cumulative Effect

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

  15. “Stephenson’s Irony” • Results of the Program – Prove the Need for It!

  16. Payment Limits • Crop Farms, Nominally • Countercyclical $65,000 • Direct $40,000 • Market Loan, LDP $75,000 $180,000

  17. But 3-Entity Rule, Certificates, No Effective Limit

  18. Dairy Limit Per Farm • $24,000

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

  20. “Is this policy” Respected Cornell Dairy Economist

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