Dairy farmers recently had until December 19, to sign up for the 2014 Farm Bill’s Dairy Margin Protection Program. That may change; USDA has already extended the deadline twice, Agriculture Secretary Tom Vilsack said, “We want dairy producers to have enough time to make thoughtful and well-studied choices.”
The extensions may have been needed because signup has been slow. At a November convention in Kansas City, Mo., National Farmers Union Sr. Vice President of Programs Chandler Goule said, “The Boston Class I is $26.80 a hundredweight. Dairymen aren’t thinking about risk management right now. We also know that dairy prices are cyclical, and when those prices start heading back down to the teens, I think you’re going to start seeing a lot more people sign up.”
Goule, who was a U.S. House Agriculture Committee aide on dairy programs when the new Farm Bill was written, also cited the need to educate producers about the new program, and told Ozarks Farm & Neighbor the number of farmers who sign up will be important. “If you look at this last Farm Bill, a lot of it moved toward insurance revenue and a type of risk management; dairy took the step in the same direction,” he said. “Hopefully, there will be significant participation.” He’s particularly happy with what the NFU calls the “Family Dairy” provision, which lets producers sign up for their first 4 million pounds of production at a discounted premium; Goule said that targets the average U.S. dairy size of 150-155 cows.
The Margin Protection program was a compromise. Producers wanted a cost of production-based support program that would limit payments to a farmer’s historic production, but processors objected and House Speaker John Boehner (R-Oh) said he would not allow a vote on a Farm Bill that included such a program. The industry was also looking for a replacement for the Milk Income Loss Contract (MILC) program, which for the last 12 years has made price based payments. Ryan Anglin, a Bentonville, Ark., producer and veteran industry leader, thinks the new program could be better than MILC. “You can protect more of your product,” Anglin told OFN. “MILC only gave you any coverage on 2.9 million pounds of milk; a large producer in Texas and New Mexico produces that much milk in a month. They can still participate in the program; a small producer like me is still above 2.9 million pounds a year, so it still helps protect me for the larger portion of my milk as well.”
The program offers catastrophic coverage when the margin between the cost of feed, using national USDA figures, and the price of milk rises to $4.00 per hundredweight. There is no premium charge for this coverage, which is on 90 percent of a producer’s output, with the exception of a $100 annual maintenance fee. Producers can also buy up coverage with additional premiums for every 50 additional cents up to $8.00, on 25 to 90 percent of their production. Anglin chose a $6.50 margin, and thinks that level provides enough protection to keep producers in business. “I think the Arkansas producers, Southeast producers, are fairly low cost,” he said. “They do a lot of grazing and don’t have a lot of money in facilities. You can’t go out and build a new barn and buy new machinery, but you can survive on $6.50 until the market comes back and corrects.”
But with the MILC program being phased out, Anglin believes Margin Protection will “make the difference between life and death” for many producers. The price, he said, “could go to the negatives, which is what it was in 2009. It just went to zero; there was no margin.” He predicted 90 percent of the producers in Arkansas will sign up for it, and said many of the dairymen he talks with around the country will do so as well, adding, “I just can’t understand why anybody wouldn’t sign up.”
