August 5, 2016

Now, Congress Wants Relief for Dairy

 |  By: Dairy Talk

It’s definitely bad form to bite the hand that feeds you. But does anyone see the irony in the letter  60 members of Congress sent to the Honorable Tom Vilsack July 28 asking for dairy relief?

Wrote the Senators and Representatives to the Secretary of Agriculture: “We are deeply concerned that U.S. dairy farmers, who are a key part of our agriculture community and agriculture economy, are in greater need of stability and support as they face these significantly lower [milk] prices.”

They listed “a number of factors” that have contributed to the crisis: Increased U.S. and global milk production, the European Union’s decision to end milk quotas last year and the loss of the Russian export market. What they forgot to list was their own failure during the last farm bill debate.

To make the Dairy Margin Protection Program (MPP) fit into its budget baseline, Congress reduced the formula to calculate the milk/feed margin by 10%. That made it that much more difficult for payments to trigger as milk prices fell and feed prices rose. At the same time, they did not adjust MPP premiums. Farmers who bought coverage above the $4 catastrophic margin level ended up paying more for less.

Consequently, dairy farmers who were skeptical of the program to begin with have become disgusted with it ever since. That disgruntlement has reached fever pitch as milk prices have fallen to their lowest levels since the Great Dairy Depression of 2009. Now, it will be even more difficult, if not impossible, to convince farmers to sign up for more than catastrophic coverage for 2017.

The National Milk Producers Federation, dairy economists and others (like me) have lost credibility with farmers because we promoted the program. We all saw it as a way to push farmers away from dependence on government payments and toward self-directed risk management, based on individual farm need. All that effort is barrels of wasted ink.

Congress is now asking Vilsack to use his secretarial authority under the Commodity Credit Corporation and use past precedent to protect dairy farmer income. Being an election year, some type of relief can well be expected and would undoubtedly be welcomed by cash-strapped farmers.

Moving forward, NMPF will work to fix the MPP in the next farm bill. But having been burned, dairy farmers will remain cynical—and rightly so. Getting them to sign up and pay for any revised program will be a hard sell, especially when they know Congress and USDA will come to their aid when milk prices again fall.