Farm Bill’s dairy components intended to help stabilize farms
The recently signed bill includes enhanced safety net features with coverage for small, medium and large dairy farms. Producers can participate in both Dairy Revenue Protection and Dairy Margin Coverage for the same milk.
Other dairy provisions include enhanced risk management tools for the beverage sector, a milk donation program that will help address hunger issues, and a vaccine bank to respond to accidental or intentional introduction of animal diseases.
The past 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,” explained Zippy Duvall, a former dairyman and current president of the American Farm Bureau Federation. “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.”
Tony Banks, a commodity marketing specialist for Virginia Farm Bureau Federation, concurred. U.S. dairy farmers, he said, “are producing more milk with fewer cows, thanks to improvements in herd genetics and management, and dairy exports have become significant. However, a relatively strong U.S. dollar in recent years makes U.S. dairy more expensive to buy in global markets. We’re also experiencing significant changes in the domestic farm-to-retail milk chain that have upset some long-standing regional market alliances and disrupted milk demand.”
The farm bill’s new Dairy Margin Coverage program makes payments when the national income-over-feed-cost margin falls below a set level. It is expected to provide more support than the Margin Protection Program it replaced, and it is more affordable, with premiums reduced 30 percent for 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 annually, was reduced 88 percent. Premiums were lowered to encourage more dairy farmers to enroll in the program, increasing the likelihood they could survive a price collapse, a spike in feed costs or a combination of the two.
“Every farm bill makes improvements on the last one,” Duvall noted in a Feb. 6 commentary. “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.”
Another new risk management tool, the Dairy Revenue Protection insurance product, or Dairy RP, became available last fall. Run by the U.S. Department of Agriculture Risk Management Agency and available through licensed crop insurance agents, it was created to give dairy farmers a way to protect themselves against price drops and tight margins.
Farm Bureau, Duvall said, “is proud to have worked with USDA to create and launch the new Dairy RP insurance product. … 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.”
At a recent meeting of the VFBF board of directors, Tim Green, vice president and general manager of American Farm Bureau Insurance Services, told Farm Bureau leaders that more than 2,200 Dairy-RP policies had been sold nationwide as of Feb. 17, covering about 8 percent of U.S. milk production.
Virginia is home to about 590 dairy farms.