Farm Bill Dairy Program Could Put Mid-sized Dairies At Risk
The new farm bill does a wonderful job of protecting smaller dairy farms, those with less than 200 cows. But that also means milk prices might not recover much in the year ahead, especially if the trade war with China and Mexico drags on.
And that could put pressure on mid-sized dairies, those with 500 to 3,000 cows, says Marin Bozic, a dairy economist with the University of Minnesota and associate director of the Midwest Dairy Food Research Center. He spoke this afternoon on a webinar hosted by I-29 Moo University.
Mid-sized dairies are not large enough to fully capture economies of scale that larger dairies enjoy, are more dependent on hired labor and their production history coverage under the new farm bill is a small fraction of the milk they actually produce, he says. “Mid-sized dairies could be the ones who equilibrate the market,” he says.
Dairy farmers in this position should begin to immediately look at risk management options for 2019 and 2020. That could take the form of Dairy Revenue Protection (DRP) insurance, Livestock Gross Margin-Dairy (LGM-Dairy) insurance or other risk management tools available through the Chicago Mercantile Exchange. (Note: Dairy farmers can take both Dairy Margin Coverage (DMC) offered through the farm bill and DRP or DMC and LGM-Dairy.)
The key is to do this early before dairy markets can price in the impact of the new farm bill, says Bozic. Waiting to do so could likely mean missed price protection opportunities.