No Farm Bill, No MILC

9/29/2012 7:00 AM
By Charlene M. Shupp Espenshade Special Sections Editor

The 2008 Farm Bill expires Sunday, closing down many USDA programs until either a new bill or stopgap measure is passed. One of the programs that will sunset is the Milk Income Loss Contract, or MILC.

This program has been the main safety net program for dairy producers in times of low milk prices and high feed prices. Based on current projections, there is no payment scheduled because the feed cost adjuster increases, according to the National Milk Producers Federation website.

The website discontinued its projections for October and beyond because of the program’s apparent end.

“With expiration of the Farm Bill, dairy farmers will lose what little safety net they have,” said Rep. Louise Slaughter, D-N.Y., who led a failed attempt last week to have the House consider the Senate-passed Farm Bill prior to adjourning until after the November election.

It’s that safety net question that is giving farmers pause. Glenn Gorrell, president of the Professional Dairy Managers of Pennsylvania, said it is disappointing that there is so much gridlock in Washington and the Farm Bill did not pass.

However, dairy farmers have some reprieve because price projections are higher than the payment triggers.

“The bright spot right now is MILC is not going to be triggered in the next 12 months, but (that) does not mean we don’t need a safety net,” he said.

Gorrell milks 600 cows with his family in East Smithfield, Pa. The program has worked really well for smaller size farmers when prices have been lower, he said.

“I think it was a great program for small farmers. The money we got from it was helpful in tight times,” said Jennifer Heltzel a dairy farmer from Martinsburg, Pa. She and her husband, Andrew, milk 130 cows. “It was more beneficial than other (USDA) programs, I will miss that.”

Although MILC was not a perfect program, “It’s a problem that we have nothing,” she said. “We won’t need MILC in the short term but it did serve a purpose.”

Eric Ooms, a dairy farmer and vice president of the New York Farm Bureau, believes there will be a Farm Bill, it’s just a matter of when. He expects it will pass either in the lame duck session or early next year.

Eric Ooms owns and operates a 400-cow dairy farm in Chatham, N.Y., with his father and two brothers. He said the milk price does look better, but feed prices continue to rise. For farms that have to purchase all their feed, 2012 could be as difficult as 2009.

This is not the first time farmers have dealt with tight margins or farm bill delays.

“There have been always been challenges. We have always overcome them,” Ooms said.

Like Gorrell, he is disappointed that a deal could not be reached in the House. He said many people have asked why the House did not move the bill, Ooms said he believes the votes were not there to pass it.

Payments under the MILC program are triggered when the Class I price in Boston falls below $16.94 per hundredweight. The base payment rate is any positive difference between $16.94 and the Class I milk price at Boston times 45 percent. There is also a “feed cost adjuster,” which can only increase the payment.

The program has a production limit of nearly 2.99 million pounds per fiscal year.

One option still left on the table is LGM Dairy. Alan Zepp from the Pennsylvania Center for Dairy Excellence said in his September “Protecting Dairy Profits” call Wednesday that LGM programs will continue. Dairy’s next offering is Oct. 26 and 27.

Zepp said that, traditionally, Pennsylvania milk price margins followed suit with the national calculator in the Chicago markets.

However, starting in January, there has been a split in trends. The Pennsylvania feed prices are higher than Chicago prices. Also, the PPDs (producer price differential) decreased. The PPD is an adjustment made to those prices for the additional value above the Class III price of fluid milk produced by a farmer.

“That put a squeeze on Pennsylvania dairy producer’s checkbooks that is not reflected by Chicago prices,” Zepp said.

Does milk have a lot of untapped potential in today’s competitive beverage market?

  • Yes
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