The recently approved federal budget agreement is expected to help farmers struggling with low milk prices by allocating more money for the Margin Protection Program for Dairy Farmers (MPP-Dairy).
By: Paul Post
Source: The Saratogian
But New York Farm Bureau says more work is needed to correct the controversial insurance program, or develop a suitable option, under the next Farm Bill that lawmakers are expected to develop this year.
The Bipartisan Budget Act of 2018, adopted by Congress on Feb. 9, included more than $1 billion for dairymen and cotton growers who say their respective government insurance programs don’t provide enough when market prices are low and production costs are high.
“The budget extender increases the amount of milk that can be covered under MPP-Dairy,” said Steve Ammerman, Farm Bureau spokesman. “It also reflects monthly prices, which are more accurate, instead of successive two-month periods. But the MPP program is filled with long-standing problems. There needs to be an alternative as we move forward with the Farm Bill.”
Andrew Novakovic, Cornell University E.V. Baker professor of agricultural economics, described how the program, created in 2014, hasn’t lived up to expectations.
“While it was certainly well intended, MPP-Dairy has not proven to be a particularly helpful or effective support for dairy farmers, who have suffered below average returns since 2015,” he said. “In its first two years of operation, farmers paid $96 million in fees and premiums, but only $12 million was paid in ‘indemnities.’ Risk management experts would quickly point out that most people don’t take out insurance with the hopes of getting paid — you don’t want your house to burn or your car to be wrecked. But critics would say, my house did burn and I didn’t get a payment.”
This problem has been addressed by providing more funding in the new federal budget deal.
Until now, the normal procedure has been for dairy farmers to elect coverage levels under MPP-Dairy in December, for a calendar year beginning in January.
The new legislation instructs USDA to reopen the 2018 sign-up process and allow dairy farmers, both those who signed up and those who did not, to elect their new choices.
“The law says the re-enrollment must occur within 90 days of enactment, so no later than early May,” Novakovic said. “The major pain will have occurred by then. Farmers aren’t going to want to wait until June or July to get a check. USDA is fully aware of that, but they also have to have time to do it right. So, we don’t know how quick help will arrive, but we should be fairly optimistic.”
MPP-Dairy pays dairy farmers the difference between the Actual Dairy Producer Margin (ADPM) and the coverage level elected by the farmer. Thus, if a farmer chooses coverage at $6.50 per hundredweight and the ADPM falls to $6.10, the farmer is paid 40¢ per hundredweight on the amount of milk covered, he explained.
The cost of premiums for one type of coverage has been reduced from 40-70 percent to encourage producer participation at meaningful levels of protection.
“Changes to the program for Tier 1 are sufficiently improved to more than justify giving the program a hard look,” Novakovic said.
Fixes to the dairy and cotton programs, included in the new budget agreement, were worked on by U.S. Senator Patrick Leahy (D-Vt.) and Senator Thad Cochran (R-Ms.), the vice chair and chair, respectively, of the Senate Appropriations Committee.
Leahy, a long-time Senate Agriculture Committee member, said, “Making these crucial investments and key changes with immediate effect will help stave off setbacks for dairy farmers who are facing another difficult year without access to meaningful risk management protection. The dairy forecasts for this spring are deeply troubling. From talking with dairy leaders in Vermont, I know that without immediate changes to protect farmers in these difficult times we will be facing a crisis situation.”
U.S. Rep. Elise Stefanik, R-Willsboro, applauded changes to the dairy insurance program, included in the budget act, which she voted for.
“When I travel the district speaking with North Country farmers, one of the most frequent concerns I hear about is with the flawed Margin Protection Program and how it gives our dairy producers very little return on their investment,” she said. “These reforms will strengthen this program for our North Country dairy producers. As we begin working on the next Farm Bill, I will continue to strongly advocate for the needs of our farmers.”