New Farm Bill Revamps Dairy Policy

Posted: March 21, 2014

Dairy cows take a drink of water after being milked at Cub Run Dairy in the McGaheysville area on a recent afternoon. Valley farmers are sizing up the most recent federal farm bill that contains some of the most significant changes to dairy policies in years. (Photos by Nikki Fox / DN-R)
Dairy cows at Cub Run Dairy rest in the barn after being milked. The latest farm bill repealed the Dairy Product Price Support program, which kept prices at a level that officials say had become outdated.

HARRISONBURG — The 2014 federal farm bill contains some of the most significant changes to dairy policies in recent years, all in an effort to help farmers during tough times. 

But if milk prices remain high, the new policies will have little effect on producers, said Jeremy Daubert, a dairy agent with Rockingham County Extension.

The farm bill, signed into law last month, directs the U.S. Department of Agriculture to establish an insurance program called the Margin Protection Program by Sept. 1.

Dairy farmers who pay an annual $100 administrative fee will receive coverage that basically amounts to catastrophic insurance for their dairy production. They also can choose to pay annual premiums to increase their insurance coverage.

The coverage becomes available depending on a figure known as a “margin,” which the USDA will calculate monthly by taking the average milk price and subtracting the average feed costs to produce 100 pounds of milk, said Daubert.

“If the margin is under $4, you are insured at that level, but you have to buy insurance above that level,” explained McGaheysville dairy farmer Gerald Heatwole. “With present milk prices, you know, you just don’t know what to do.”

Eric Paulson, executive secretary with the Virginia State Dairymen’s Association, said the “margin” number basically covers costs like operating expenses, fuel and labor.

“If we get to a point where insurance is paying out and farmers are getting that $4 margin, that would be a terrible time for the industry,” he said. “At $4, the producer is probably losing money, honestly, but at least it’s not a catastrophic loss.”

Within 120 days of initiating the Margin Protection Program, the USDA will introduce the Dairy Product Donation Program. It activates if the “margin” number falls below $4 for two consecutive months, Daubert said.

At that point, the USDA would purchase retail dairy products and donate them to nonprofit organizations, like food banks, until the “margin” rebounds.

The new farm bill repealed the Dairy Product Price Support program, which supported dairy prices at a level that officials say is outdated today.

Daubert said the program was often thought to actually prolong periods of low milk prices since it purchased dairy products and stored them for later resale. Also, the Milk Income Loss Contract program, which is designed to help supplement the income of producers when milk falls below a certain price, is being phased out.

MILC will remain in effect until the new insurance program, the Margin Protection Program, is in place, or Sept. 1, whichever comes first, said Tony Banks, assistant director of the commodity/marketing department with the Virginia Farm Bureau.

Heatwole, who runs Cub Run Dairy in a partnership with his son, Monte, said most people in the dairy industry feel the new programs are the best they could hope for, considering the need to reduce the federal deficit.

“If you feel OK with anything with the Congress these days, I guess you are fortunate,” he added.

Contact Jonathon Shacat at 574-6286 or jshacat@dnronline.com



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