In a public letter penned last week, Sen. Kirsten Gillibrand, D-NY, called upon President Donald Trump to reject any farm bill that does not include a refund for farmers who paid into a failed dairy insurance program.
Established by the U.S. Department of Agriculture in 2014, the Margin Protection Program for Dairy Producers is the primary insurance option for dairy farmers to protect their revenue when their production margins fall below a certain dollar amount. Production margins are designated as the difference between the price farmers receive for their raw milk product per hundredweight, or per 100 pounds, and the cost of feed for their dairy cattle.
For farmers, especially in New York, where milk is the leading agricultural product, the MPP at first seemed like a logical investment. Ninety-eight percent of Delaware County dairy farmers bought into the program when enrollment began in 2015, according to Mariane Kiraly, a senior resource educator with Cornell Cooperative Extension.
She said while some farmers received payouts within the first year, the program ultimately did not deliver on its promises.
“Farmers felt betrayed,” Kiraly said. “The program cost a lot of money and it didn’t pay out. It didn’t act like insurance should.”
Base premiums for the program start at $100, but can amount to several thousands of dollars, depending on the farmer’s production history and the selected margin coverage levels, which range from $4 to $8.
Thousands of New York farmers lost out on millions of dollars when milk prices and feed prices fell at the same time, according to a media release from Gillibrand’s office, and the resulting margins fell outside of the program’s coverage range.
National milk prices reached a record high in 2014, when farmers received an average of $24.07 per hundredweight, according to data from the USDA’s National Agriculture Statistics Survey (NASS), but prices have since plummeted. The USDA forecasts farmers earning around $16.35 per hundredweight for the 2018 marketing year.
While there are several factors that determine the price of milk, Kiraly and her Cooperative Extension colleague Paul Cerosaletti attributed the four-year plunge in prices to both a distorted landscape for international trade and a decline in domestic sales.
Kiraly cited growing tensions between the U.S. and some of its top trade partners, including Canada, Mexico and China. Hefty tariffs, especially from China, the third-largest market for U.S. dairy, have significantly slowed the growth of exports.
On the home front, Cerosaletti said, fewer people are drinking milk. Instead, U.S. consumers are turning to dairy alternatives, such as those made from nuts, soy, oats and even hemp.
As a result, dairy farmers are facing what Cerosaletti described as a “prolonged” challenge.
For several years now, he said, the consensus among local farmers has been that occasional peaks in milk pricing are not enough to sustain their production costs. When prices do increase — as they are intermittently prone to, even in what Cerosaletti termed a “volatile” U.S. market — the resulting windfall never lasts long enough to allow for any long-term recovery or stabilization.
In addition to falling milk prices, New York dairy farmers also must contend with the relatively high cost of feeding their cattle, Cerosaletti said. Production margins are calculated using a national average of feed costs and do not account for regional differences in climate and growing conditions. This national average favors farmers in the Midwest, for whom the cost of transporting feed is all but eliminated. For farmers in the Northeast, who primarily rely on grain imported from out of state, feeding their cattle is much more costly.
In July, the Senate passed a Farm Bill with bipartisan support. The bill included a $73 million provision secured by Gillibrand and earmarked for the issuance of refund checks to farmers for any unused MPP insurance premiums from the previous year. Currently, the remaining funds are returned to the U.S. Department of Treasury, rather than to the farmers who paid them.
“Now is a time of unprecedented distress on dairy farms in every state and a failure to take meaningful action may condemn hundreds of dairy farms and farm families to financial ruin,” Gillibrand wrote in her letter to Trump. “As a fellow New Yorker, you know the important role that dairy plays in our state and you have spoken frequently in support of dairy farmers and their rural communities.”
Kiraly said the $73 million refund would mean more to New York farmers than cash in their pockets.
“It would be a very nice gesture,” she said, adding that passing the bill would also demonstrate a substantial commitment to farmers on the part of the federal government.
“It would be like the government saying, ‘We admit that we were wrong (about the MPP), now here’s your money back,'” Kiraly said.
Source: The Daily Star