Dairy fared the best of any segment of the ag industry in the 2018 Farm Bill. And it needed to, according to Alan Bjerga with the National Milk Producers Federation. Bjerga addressed the North American Agricultural Journalists organization during its annual spring meeting in Washington, D.C.
“There’s a lot of variety in our membership,” Bjerga said. “We have members from the small producers to the largest dairies. That gives us a lot of territory to cover and a wide variety of safety net needs.”
The Margin Protection Program, which was the initial 2014 Farm Bill attempt to create a safety net for dairy farmers, was flawed on a number of points, Bjerga said. For starters the feed-cost compromise was good politics but bad policy. Over time, farmer coverage based on the margin between cost of milk and cost of feed plummeted.
“The idea is to make sure dairy farmers can stay in business if they are doing everything right. The MPP didn’t do that,” he said. “Farmers — good farmers — have been going out of business in record numbers.”
It isn’t all about margins. 2009 saw the lowest dairy margins in a century and margins again hit lows in 2012 and 2013. During those events, there was not a strong uptick in dairy farm failures, however; because the price of feed — corn and soybeans — was relatively low. It was that environment that saw the writing of the 2014 Farm Bill and the Margin Protection Program. That program offered coverage for margins of $4 below normal at no premium. Farmers who chose $8 coverage had to pay premiums.
As the margins between food and milk prices rose, many farmers opted out of the higher coverage and kept only catastrophic coverage to try to hold down costs.
In 2014, 2016 and 2017, dairy farm failures held steady at about 4 farms going out of business daily. In 2018, the failure numbers skyrocketed, with about 7.5 far failures a day.
That prompted action by Congress, which created a better safety net in the appropriations bill and provided a better baseline for the 2018 Farm Bill to create the new Dairy Margin Coverage plan; a two-tiered plan that offers Tier1 protection for the first 5 million pounds of production and Tier 2 protection for producers with more than 5 million pounds. It also increases the coverage limit to $9.50.
Bjerga said dairy farmers need a quick rollout of the new program and Congress has promised one. Payments for the new DMC plans are expected to begin in July.
He said the industry is not united on the subject of supply management.
“For negotiations on the farm bill, the goal was to get everybody on the same page and put out an idea on what was allowable in the range of discussion,” Bjerga said.
Since the dairy industry has both producers and processors, elements of the industry are fundamentally at odds on milk prices. Producers want high prices, processors want low prices.”