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July 6, 2017

CBO Raises Dairy Baseline

 |  By: Jim Dickrell

The Congressional Budget Office (CBO) raised the 11-year dairy baseline to $839 million in its latest calculation, released late last week. That money can be used to fund both the Dairy Margin Protection Program (MPP) and the Dairy Donation Program.

If you subtract the $63 million that is projected to be spent on dairy donations through 2027, that leaves $776 million for the MPP. That’s up from $500 from its 10-year baseline in August 2016.

That means that farm bill improvements to MPP could spend up to the $776 million level over the next 11 years without having to find additional money from other farm bill programs. Earlier this spring, some dairy state legislators tried to boost the dairy baseline by taking dollars from the cotton program, which resulted in a budget stalemate.

CBO is actually projecting fairly strong milk prices over the next decade, gradually climbing from an all-milk price of $17.60/cwt in 2017 to $19.10/cwt in 2027.  Milk/feed cost margins are also projected to average more than $9/cwt for the period. 

But that doesn’t mean margins won’t dip below the $8 level where MPP payments might be triggered, notes John Newton, Director of Market Intelligence with the American Farm Bureau Federation. “Even though we see farmers rolling out of the MPP program now, that doesn’t mean they couldn’t come back if margins are projected to be lower at some point or the program is improved in the farm bill,” he says.