Dairy Security Act Stirs Up Controversy

A bill was introduced recently in the House of Representatives that aims to revise milk price supports in the United States.  Democrat Collin Peterson of Minnesota and  Republican Mike Simpson of Idaho introduced the Dairy Security Act of 2011.  The bill provides dairy farmers with the option of purchasing margin insurance that is designed to provide payment to farmers when the margin between milk price and feed price decreases below a certain threshold.  For those purchasing margin insurance, the bill also requires enrollment in a Dairy Market Stabilization Program intending to reduce milk production during low margin time periods.  The bill is already is stirring up controversy. 

The National Milk Producers Federation offered its support for the bill:

The Dairy Security Act (DSA) bill is somewhat different from the legislative discussion draft introduced by Peterson this summer, in that it now makes voluntary the Dairy Market Stabilization Program (DMSP), which will help reduce milk output during times of low margins. However, if dairy producers wish to elect to enroll in the subsidized margin insurance program through the U.S. Department of Agriculture, they will automatically be enrolled in the Dairy Market Stabilization Program so that they are promptly alerted when additional production may affect their overall margins.

The new legislation is also an improvement over the earlier version, according to NMPF, because extends the Basic level of margin insurance coverage to 80 percent of a producer’s production history, from 75 percent as initially proposed. The Supplemental margin coverage option is also improved, as it will now allow producers to purchase insurance for growth in their milk production history.

Other changes to the final version of the legislation include a refined provision in the Dairy Market Stabilization Program to ensure that it does not activate during times when signals for farmers to reduce production may impinge on the ability of the U.S. to export dairy products.

Meanwhile, other dairy industry trade organizations have already lined up to critisize the bill.  The Wisconsin Dairy Business Board wrote to Senate and House Committees on Agriculture:

We are becoming increasingly alarmed that policy makers and elected officials believe there is consensus in the dairy industry on proposed dairy policy.   There is not, and we hope that these letters will serve as evidence that while we agree that dairy policy reform is necessary, it must not come at the expense of farmers and others who rely on the industry for their livelihood.

Dairy farms are important to our communities, our families and our economy.  And the growth of dairy in our regions has expanded jobs and created potential in our industry for the next generation of dairy farmers.

Some farmers feel that a government run ‘supply management’ program would help make sure all farmers stay within historical production limits and that this would help keep prices at profitable levels.   We strongly disagree with this approach, and oppose any regulations designed to manage the milk supply by requiring all farmers to reduce their production.

The Wisconsin Dairy Business Board is joined by the Board of Directors of Bongards’ Creameries (Minnesota), Minnesota Milk Producers Association, First District Association (Minnesota), Alliance Dairies (Florida), Dairy Business Milk Marketing Cooperative (Wisconsin), Dairy Policy Action Coalition, High Desert Milk (Idaho), National All-Jersey Inc. (Ohio) and the Northeast Dairy Producers.   The full text of the letter can be found here.

Both sides agree on one thing--the time has come to reform the way milk is priced in this country.  But figuring out how that should be done will lead to a lot more debate.

By Todd J. Janzen

Agriculture Consultant Offers Warnings About Indiana's New Confined Feeding Operation (CFO) Regulations

An environmental and agricultural consultant, Scott Severson, recently wrote an article for Indiana's dairy farmers cautioning them about some of the new restrictions contained in the Indiana Department of Environmental Management's (IDEM) new regulations for confined feeding operations (CFOs) and concentrated animal feeding operations (CAFOs).  IDEM's upcoming CFO and CAFO regulations are still in draft form, so it is not too late to send IDEM your comments in for review.  Scott's article appears below:  

There are several items in the proposed rule that will add long term compliance expense for many of your regulated members.  When compared to the current CFO rule, in most cases, the proposed rule will hit CFO’s harder than CAFO’s.  I will focus on two such items that have the most immediate and noticeable impact: 

1.  Virtually Eliminates Manure Application to Frozen or Snow Covered Ground:

·                    The proposed rule allows CFO’s to apply manure to frozen or snow covered ground only on an emergency basis.  In practice this means your regulated IPDP members cannot rely on winter time spreading as part of their long term manure management operations.  Even when they can winter time spread in an environmentally sound manner, they will eventually incur the cost of expanding manure storage so winter time spreading does not occur.

·                    Both the existing CFO rule (at 327 IAC 16-10-3) and CAFO rule (at 327 IAC 15-15-14) allow manure application on frozen or snow covered ground subject to specific management plan conditions.  IDEM has no supportable basis to abandon the existing provisions and create a blanket prohibition on frozen ground application. The rule should be revised to allow land application on frozen or snow covered ground in accordance with existing CFO rule conditions.

2.       Manure Application Rates Based on Phosphorus not Nitrogen:

·                    The proposed rule will eventually require all CFO’s to limit manure application based on phosphorus content not nitrogen content.  Under the proposed rule manure cannot be applied to a field with a soil test of greater than 200 ppm phosphorus, even when manure can be applied to that field with little or no known environmental risk.  For many IPDP members, this will lead to immediate operational changes.  Many producers will need to reduce manure application rates in half to meet phosphorus limits and as a practical result, will incur costs associated with needing twice the amount of acres used for manure application.  In some cases, purchase of supplemental nitrogen fertilizer will be necessary due to an application rate based on phosphorus not nitrogen.  This too will add costs.

·                    Indiana is not required by EPA to add phosphorus application limitations to its CFO regulations.  I am not suggesting that phosphorus is not a concern, but there are already two existing mechanisms in Indiana to address manure application and phosphorus issues: the Office of the State Chemist, and IDEM’s Watershed Planning Branch.  IDEM’s proposed phosphorus standard is a third mechanism to address phosphorus concerns.  In accordance with the Governor’s commitment to reduce burdensome regulations on business, do we need to maintain or expand a third mechanism to manage phosphorus?

·                    There is no flexibility in the proposed phosphorus rule.  Every field is different.  A producer should have the ability to make a site specific demonstration that an alternate soil test phosphorus number would be equally protective of the environment.

·                    How does this regulation benefit the environment and at what cost?  The provisions regarding land application of phosphorus will eventually burden most farms with a known measureable compliance expense.   It is unknown whether that cost will result in equal or greater economic benefit.  Soil erosion and conservation management practices also play a role—indeed, may play a bigger role—in reducing phosphorus impact on surface water.  This is why I suggested above, that we focus on the two mechanisms in place already that will give us a bigger bang for the buck compared to the proposed IDEM phosphorus standard.

The common threat we all face, in the animal feeding industry, is not necessarily IDEM but rather the external forces that pressure IDEM to make certain policy decisions.  We should not think more burdensome regulation is always inevitable and give up.  Voicing our concerns now, in appropriate manner, will produce positive results. 

Scott Severson is an agriculture and environmental consultant for Earthwise, Inc.  He can be reached at: EarthWise, Inc., 63 Franklin Street, Valparaiso, IN 46383, phone: 219.531.0266, email: sseverson.earthwise@gmail.com. 

Insurers Must Defend Tyson Foods Against Manure Complaints

A few years ago I wrote an article about whether a livestock farmer would be insured under his (or her) general liability policy if he were faced with a lawsuit alleging injury or damage caused by "manure."  The potential problem for the farmer is that his insurance policy likely contains a "pollution exclusion" that attempts to exclude claims involving "pollutants" that would otherwise be covered.  In my prior article, titled "Is Manure a Pollutant?," I explained how this issue might arise:

A typical [commercial general liability] policy contains an exclusion for claims "arising out of the actual, alleged or threatened discharge, seepage, migration, dispersal, release or escape of ‘pollutants’." "Pollutants" is typically defined as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned, or reclaimed." "Manure" is generally not a specifically listed pollutant. Whether it falls within or outside of a pollution exclusion is a legal matter for a court to determine.

I concluded back then, based upon a long line of cases holding that industrial, commercial and household wastes were not "pollutants" under common pollution exclusions, that Indiana's appellate courts would likely conclude that "manure" was not a "pollutant."  See e.g., American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996) (holding that "gasoline" was not included in the definition of "pollutant").  Although there was no case on point, the Arkansas Supreme Court had determined that human septic waste was not included in the definition of "pollutants" in Minerva Enterprises, Inc. v. Bituminous Coal Corp., 851 S.W.2d 403 (Ark. 1993):

In Minerva, a tenant sued his mobile home park owner after returning to his home to find that a defective septic system had caused an overflow of liquid and solid sewage in his home. The park owner’s insurance carrier refused to provide defense and indemnity because of a pollution exclusion. The Arkansas Supreme Court disagreed, finding the pollution exclusion to be ambiguous. The court held that the pollution exclusion was intended to exclude industrial wastes, not household wastes. Moreover, "the pollution exclusion was never intended to cover those who are not active polluters but had merely caused isolated damage by something that could otherwise be classified as a ‘contaminant’ or ‘waste.’"

The Minerva court declined to apply the pollution exclusion to septic waste.

Recently, the Delaware Superior Court was asked to decide whether "manure" was excluded from coverage under a number of different insurance policies' pollution exclusions.  In Tyson Foods v. Allstate Insurance Company, Tyson Foods was faced with complaints that its poultry manure handling practices caused property damage to the Illinois River Watershed and bodily injury to certain individuals living nearby.  Tyson Foods' insurers denied coverage for these claims, citing the "pollution exclusions" in various policies.  On August 31, 2011, the Delaware Superior Court disagreed.  Applying Arkansas law, it held that, based upon Minerva and cases that followed, the pollution exclusions were ambiguous and therefore did not obviously exclude the alleged damage caused by Tyson Foods' poultry waste applications.  The court ordered the insurers to provide a legal defense to Tyson Foods against the allegations of property damage and bodily injury.

This is a significant victory for Tyson Foods as it insurers will now be required to provide it with a legal defense against the allegations in the complaints.  This case should also be a lesson to livestock farmers to check their insurance policies for "pollution exclusions" that an insurer might assert to exclude coverage for manure-related incidents.  Equally important, the Tyson Foods case teaches that a policyholder may challenge an insurer's denial of coverage and ask a court to resolve the dispute.

By Todd Janzen.