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February 8, 2018

Proposed Senate Budget Deal To Strengthen Dairy Safety Net

 |  By: Anna-Lisa Laca

Senate leaders announced a two-year budget deal on Wednesday that will keep the government funded through March 23 and modify the safety nets for cotton and dairy.

According to Jim Wiesemeyer, ProFarmer Washington policy analyst, Senate Majority Leader, Mitch McConnell (R-Ky.), announced a deal with Senate democrats to fund the government and set spending levels for defense and nondefense programs over the next two years.

“The legislation would avert a government shutdown on Friday, when federal funding is due to expire, and boost defense and nondefense programs,” he says. “The legislation would keep the government funded for another six weeks, through March 23.”

The long-awaited disaster relief package is included in the deal which also brings a change for cotton and dairy farmers. The two-year budget deal would eliminate the $20 million cap on the livestock gross margin program (LGM). "That's huge," says John Newton director of market intelligence for the American Farm Bureau Federation.

The National Milk Producers Federation (NMPF) says the package will also bolster the Margin Protection Program (MPP), a safety net program resulting from the 2014 farm bill, which has been largely ineffective. The fixes to both MPP and LGM "help pave the way for final adjustments to the dairy safety net for the next five years as Congress crafts a new Farm Bill," says Jim Mulhern, NMPF CEO.

"Taken together, these changes will provide important risk management tools for dairy farm operations of all sizes," he says.

According to Wiesemeyer, if the deal passes, potential MPP payments would be calculated on a monthly rather than a bimonthly basis in place under current law. Premiums for small and medium-size farms would be eliminated on $4.50 and $5 coverage levels and sharply reduced at all higher levels. The lower premium rates would apply to the first 5 million pounds of a farm’s historical production, up from the current limit of 4 million pounds. “The higher limit represents the production of about 223 cows,” he says. “The current limit of 4 million pounds is the equivalent of about 185 cows.”

Still, larger farms will likely go back to using revenue insurance once the funding cap is removed.   

“The proposed changes to cotton and dairy policy would boost the long-term spending baseline for the next farm bill, giving agriculture lawmakers additional money for the legislation,” Wiesemeyer says.

A legislative fix for the controversial Section 199A provision of the Tax Cuts and Jobs Act is not included in the Senate plan, Wiesemeyer adds.

According to Chuck Conner, with the National Council of Farmer Cooperatives, modifying that language will be a priority as lawmakers focus on details of the fiscal 2018 spending plan.

"Of special importance will be resolving the unintended impacts of Section 199A in a way that maximizes farmers’ economic returns during these trying times in rural America while maintaining the competitive balance that existed before passage of the tax reform bill," Conner says.

The proposed deal does not include any language to shelter the thousands of immigrants who came to the U.S. through the DACA program. House Minority Leader Nancy Pelosi (D-Calif.) says she will oppose the deal without a commitment from Speaker Paul Ryan (R-Wis.) to consider legislation to protect "Dreamers" and other immigrants facing possible deportation next month, according to Wiesemeyer.

Still, because the budget deal is backed by Sen. McConnell and Senate Minority Leader Chuck Schumer (D-N.Y.),Wiesemeyer expects the bill to pass as part of a stopgap funding measure before the February 8 deadline for a government shutdown.