Better options for dairy farmers are on horizon
WASHINGTON — Across the nation, farmers are struggling. In December, USDA forecast a 12 percent drop in 2018 net farm incom.
But perhaps no sector has been hit as hard as dairy.
Dairy farmers have been struggling with falling milk prices for the past four years. Some dairies are selling out while others are simply getting bigger.
Overproduction, weak consumer demand and trade issues all contribute to a crisis that seems to have no end in sight.
Though it may not be enough for some, stronger safety nets for the dairy industry will roll out with the 2018 Farm Bill and a new insurance policy called Dairy Revenue Protection (Dairy-RP), which was developed by the American Farm Bureau Federation and is administered through the USDA Risk Management Agency.
“People ask me how I sleep at night and this is it. Dairy-RP has made me a different person,” said David Pyle, of Cow Comfort Inn Dairy in Union Bridge, Md.
Dairy-RP made its debut last fall and sign-ups began on Oct. 9.
AFBF reported that nearly 3 billion pounds of milk were covered in the first year.
Dairies in Maryland and Virginia have been slow to participate. As of early February, a total of 11 policies had been sold to cover nearly 15.2 million pounds of milk in Maryland and Virginia, according to Federal Crop Insurance Corporation reports.
Dairy-RP was designed to help protect against declining revenue from milk sales.
It does not insure against death or destruction of dairy cattle or any other type of loss or damage.
Farmers purchase quarterly revenue coverage and are paid an indemnity if the actual milk revenue falls below the final revenue guarantee.
The final revenue guarantee is determined by several factors, which can be tailored by the dairy farm to suit his or her needs.
First, the farmer determines the amount of milk production to cover and selects a pricing option, based on the value of the milk.
Farmers can choose between the Class Pricing Option, which uses a combination of Class III and Class IV milk prices as a basis to determine coverage, or the Component Pricing Option, which sets prices based on butterfat, protein and other solids.
As with other revenue protection policies, the farmer selects the level of coverage. With Dairy-RP, farmers choose from 70 to 90 percent revenue guarantee.
One of the most important aspects of the new Dairy-RP program is that it can be combined with The USDA Farm Service Agency’s Dairy Margin Coverage program, which replaces the Dairy Margin Protection Program.
The revamped margin program promises dairy farmers more affordable options with higher coverage levels.
Dairy industry leaders are urging USDA to prioritize the implementation dairy programs, like DMC, which have been delayed after the record 35-day federal government shutdown.
Pyle said the implementation is desperately needed.
“They did a fantastic job revamping MPP, a lot of great things were accomplished. But we have no idea when the government is going to settle and stay in business. We’re just waiting to see how long it will take to roll DMC out,” Pyle said.
In an effort to offer dairy farmers a better safety net, the revamped DMC increases coverage thresholds up to $9.50 per hundredweight. The previous maximum coverage threshold was $8 per hundredweight.
Very few farmers received payment at the $8.00 level.
Between 2014 and 2017, more than 20,000 dairy farmers participated in MPP, paying more than $100 million in premiums and administrative fees to USDA’s Farm Service Agency.
But FSA paid out less than $12 million to farmers.
Now, dairy farmers have an opportunity to recoup this lost investment.
Under the 2018 Farm Bill, dairy farmers are eligible for a refund on their premiums, not including administrative fees.
They may select a 50-percent refund in the form of a direct cash payment or a 75-percent refund in the form of a credit towards DMC policies for 2018 to 2023.
Another important change for dairy farmers is that they are no longer precluded from participation in multiple insurance programs.
The 2018 Farm Bill now enables dairy farmers to fully utilize private crop insurance products such as Dairy-RP or Livestock Gross Margin for Dairy Cattle with their DMC policy.
The hope is that a layered risk management strategy will offer dairy farmers much stronger protections while they weather one of the industry’s most difficult periods.
Dairy Margin Coverage is offered through the USDA Farm Service Agency.
Visit fsa.usda.gov for program details or contact your local office for more information.
Dairy Revenue Protection and Livestock Gross Margin for Dairy Cattle are administered through the USDA Risk Management Agency and available through private crop insurance agents.
Visit rma.usda.gov for more information or to locate an agent.
1-800-634-5021 410-822-3965 Fax- 410-822-5068
P.O. Box 2026 Easton, MD 21601-8925