USDA Uses Red Tape To Try To Undo Benefits To Farmers
Of The New National Dairy Program
 

Statement Of Senator Patrick Leahy
Hearing On Implementation
Of The 2002 Farm Bill
Senate Agriculture Committee: Agriculture Secretary Veneman
Tuesday, September 17, 2002

I want to thank the distinguished Chairman, Senator Harkin, and the distinguished ranking member, Senator Lugar, for holding this important hearing. 

Farmers in Vermont and across this country are facing difficult times and counting on the support provided by the new farm bill.  It is vitally important to them that USDA get it right and implement the new farm bill properly.

I also want to thank Secretary Veneman and her colleagues for appearing before the Committee today.  I realize it is a tremendous undertaking to implement this new farm bill, and I want to thank you, and the countless members of the USDA staff who are working long and hard to make sure things go as smoothly as possible.

Mr. Chairman, today my questions will focus mainly on USDA’s implementation of the national dairy program.  I have concerns regarding other areas of implementation too, and I plan to submit for the record a number of questions regarding those areas.

The national dairy program was designed to provide dairy farmers income support payments that will be virtually identical to what Vermont dairy farmers would have received under the Northeast Interstate Dairy Compact.  Payments are to be made retroactively, covering production and low prices since December 1, 2001.  On that date, prices for Class I fluid milk fell below the Compact's trigger level ($16.94 per hundred weight in Boston) -- which is identical to the trigger level for this new program. 

Unfortunately, prices have been below that trigger level ever since, and they continue to fall, leaving producers in Vermont and other states greatly in need of these payments.  Farm-level milk prices are at their lowest levels in over 10 years.  Only 3 times in the last 25 years have prices been this low.  In addition, due to the flood and drought combination this year, many farms have poor crops and will have trouble feeding their herds through the winter. There is no relief in sight other than the national dairy program.  Our dairy farmers need this assistance and they need it now.

The national dairy program was designed to be farmer-friendly and easy to administer.  But I believe USDA has made the program overly burdensome, overly complicated, and overly restrictive.

Madam Secretary, you and I have known each other for many years.  I consider you a friend.  Friends can be blunt with each other:  During the farm bill, USDA fought us on the national dairy program every step of the way.  That was your prerogative.  But we won and the Department lost.  Now I fear that you are trying to undue administratively what we accomplished legislatively, and I find this outrageous.

Congress wrote a farmer-friendly dairy program.  USDA is making it farmer-unfriendly.  USDA needs to maximize the payments, not minimize them. USDA should encourage participation, not discourage it.  Every dollar will pass through the farmers' hands and have a major impact on the economies of rural communities. 

Unless changes are made, thousands of Vermont dairy farmers — and tens of thousands more across the country — will not receive the full measure of support that Congress intended. 

In August, I, along with my colleagues in the Vermont Congressional delegation wrote you to express our concerns.  I would like that letter to be included in the record for today’s hearing.  We pointed out that Vermont dairy farmers were very disappointed that USDA didn’t begin the signup in July as the law required.  We asked you to ensure that the first payments are made on time — by October 1 — and that there are no further delays in implementation.

We asked you to change the rules that relate to the so-called “transition” payments to address the unfairness that results in medium-sized dairy operations receiving smaller payments than both larger operations and smaller operations.  Under your proposed rules, producers are not allowed to pick the beginning month for the transition period - all producers will begin receiving payments based on their eligible production beginning December 2001. 

Prices have fallen every month this year, and as a consequence the payment rate has gone up each month.  The payment rate in December 2001 was 77 cents while the payment rate in August 2002 was a $1.44 - exactly double.  Thus, a producer who reaches the cap would be better off if he could elect to begin receiving retroactive payments later in the fiscal year.  But your Department created a special rule that essentially gives only the largest of producers that choice.  You are allowing producers to forgo the retroactive payments all together and simply receive the regular payments beginning in September.  This only benefits producers who come close to the production cap in a single month.  The producers who suffer under this rule are those with between 150 and 600 cows, who reach the production cap earlier in the fiscal year when payment rates were lowers, and yet don't produce enough to take advantage of this "September option."  

One of the oddest results is that dairy operations that I would describe as medium-to-large sized—those with between 150 and 800 cows—receive smaller payments than larger operations—those with more than 800 cows--and they receive smaller payments than smaller operations—those with fewer than 150 cows.  I don’t believe this is fair.  And it certainly isn’t what my colleagues and I in Congress intended.  I again urge you to fix this by allowing producers to select the beginning month for which they receive a transition payment.

We asked you to make sure that the same rules apply with respect to the definition of “dairy operation” regardless of where a dairy farm is located.  I understand that each FSA state executive director was asked to complete a survey describing how the state FSA office defined a dairy operation for purposes of previous dairy market loss assistance (DMLA) programs.  I have heard that the survey results reveal that states did not implement the DMLA program uniformly.  Producers in certain states qualified for multiple DMLA payments while similarly situated dairy producers in other states qualified for only one.  Do you intend to lock in these disparities, or will states have the flexibility to implement the national dairy program in the same manner as other states?  Congress intended this to be a national program and the same rules should apply in every state.

Finally, we asked you to ease the paperwork burden on producers by allowing dairy cooperatives and other milk handlers to report monthly milk marketings on behalf of producers.  I hope that you will expedite this to ease the burden on dairy farmers and USDA staff alike, and to speed payments.

While I have not received a response to this letter as of yet, do I hope you will be able to respond to my concerns today.  I look forward to hearing your testimony on these matters.

# # # # #