The last few years have been tough for dairy farmers. Or, maybe I should say even tougher, since the ups and downs of dairy prices often make the dairy business challenging.
But things are especially challenging now. The price of milk today is less than it was a decade ago.
To anyone out there who draws a paycheck, I ask you to think about having to live and fund a business on the same amount of money, or even less, than you earned a decade ago. That’s what our dairy farmers are coping with.
Fortunately, help is on the way via the new farm bill. The new Dairy Margin Coverage program makes payments when the national income-over-feed-cost margin falls below a set level.
Based on the margins of the past 10 years, we know that the new program will provide more support than the previous Margin Protection Program, which it replaced.
Under DMC Tier I coverage, available on the first 5 million pounds of milk produced, margin guarantees are set at $8.50, $9 and $9.50, depending on the coverage selected and paid for by the producer.
The average margin over the last decade was $8.11, so even the lower end of coverage in this top tier of the program will provide more certainty and support during a downturn.
The coverage also is more affordable. The farm bill reduced premiums 30 percent for the top tier of coverage.
The premium for a second, lower tier, available to those who need coverage on more than 5 million pounds of milk, was reduced 88 percent in this farm bill. These lower premiums are meant to encourage more dairy farmers to sign up.
A further 25 percent premium discount for dairy farmers making a one-time election of coverage level and amount of milk covered for the next five years sweetens the pot and ensures the farm bill will do its job — help more dairy farms survive a price collapse, a feed-cost spike or a combination of the two.
Every farm bill makes improvements on the last one. Farmers and ranchers weigh in on what has worked and what hasn’t, and Congress writes new program provisions to afford the best possible web of risk management tools possible.
The Margin Protection Program created in the 2014 farm bill was the first attempt to address tight profit margins. It was a good idea that just didn’t go far enough to help milk producers with the market volatility that was headed their way.
That’s why farmers and their representatives in Congress get another whack at farm programs every five years — because markets change and so should farm bills.
Another new risk management tool, Dairy Revenue Protection, became available last October, even before the improvements in the 2018 farm bill. Dairy-RP already is proving to be popular with producers.
The insurance product, run by USDA’s Risk Management Agency and available through licensed crop insurance agents, gives producers a way to protect themselves from price drops, not just tight margins.
In the first few months these insurance policies were available, Dairy-RP policies were in place on more than 13 billion pounds of milk, 6 percent of the expected U.S. milk production for 2019.
Farm Bureau is proud to have worked with the U.S. Department of Agriculture to create and launch the new Dairy-RP insurance product. Dairy farmers need all the risk management options they can get.
Just like row crop producers, milk producers now have the flexibility to use both the programs in the farm bill and crop insurance together to survive the risk inherent in farming and dairy production.
I’m saddened that these tools are coming too late for so many multi-generation family dairy farms that have shut down in recent years. But I’m hopeful that they will quickly come along in time to save many more from the auction block.
AFBF is working hard to communicate how important a timely farm bill implementation is for dairy farmers. As a dairy producer for many years before switching to beef cattle and poultry production, I still have a great love of dairying.
My favorite food is vanilla ice cream, and I know I’m not alone. Americans love dairy foods and want to save our dairy farms.
I’m confident that these new tools will help an industry that is near and dear to me, personally, and vital to consumers, our economy and our nation’s agricultural heritage.