A leading dairy farmers group threw its support Monday behind a proposed overhaul of federal milk subsidies after its creator agreed that participation in a program limiting milk production in hard times would be voluntary.
The plan developed by Minnesota Rep. Collin Peterson would replace current federal dairy programs with new ones intended to do a better job of protecting farmers from the kind of crisis they suffered during the recession in 2009, when milk prices plunged, feed costs skyrocketed and hundreds were forced out of business.
Peterson's original plan called for limits on how much milk farmers could produce when the difference between milk prices and the cost of producing milk, as determined by feed prices, fell to a certain level. The intent was to balance supply and demand.
Some farmers objected to the federal government limiting how much milk they could produce, saying the answer to problems facing the dairy industry was less government interference, not more.
After getting feedback for several months, Peterson, the ranking Democrat on the House Agriculture Committee, agreed to make participation in the so-called dairy market stabilization program voluntary.
But, farmers would have to participate in that program to qualify for another, more popular one that works like an insurance system. In effect, dairy producers would pay premiums in good times that would enable them to collect more generous government payouts in bad times. If they chose to pay nothing, they would get a minimal subsidy.
Peterson and Rep. Mike Simpson, an Idaho Republican, introduced the revised legislation Friday.
Jerry Kozak, president and CEO of the National Milk Producers Federation, called it a bipartisan bill that is "good policy as well as good politics."
He noted the nonpartisan Congressional Budget Office has predicted farmers representing 60 percent of the U.S. milk supply would sign up and agree to the restrictions, saving the federal government $167 million over the next five years. The predicted savings over 10 years would be less, $131 million.
The federation said it would encourage its members ask their members of Congress to co-sponsor the bill.
California and Wisconsin are the nation's top milk producers.
The International Dairy Foods Association, whose members process cheese, ice cream and fluid milk, said last week it remains opposed to any form of supply management.
The bill's prospects are uncertain. House Agriculture Committee Chairman Frank Lucas, R-Okla., has said he would not support passing a dairy reform package before the 2012 Farm Bill unless all sides agreed. A companion bill has not been introduced in the Senate.