Dairy Owners ‘Kick The Tires’ On New Insurance Program
By Ross Courtney, Yakima Herald-Republic, Wash. |
Late last week, about two dozen dairies had enrolled in the Dairy Margin Protection Program, part of the 2014 farm bill. The registration deadline was Friday.
"Usually people don't think of our programs until they need them," said
And dairy owners might need the help this coming year.
"It could come into play next year," said
Dairy owners had enjoyed a year or so of climbing milk farm-gate prices, but they have been plummeting the past few months, driven by ample supplies in other parts of the world and a slowdown in Chinese milk powder purchases, said
Low prices alone, however, won't trigger insurance payments under the Dairy Margin Protection Program. Instead, the policy kicks in when returns hit a certain floor, calculated by an arcane formula that compares prices to feed costs.
The margin program replaces a few older methods of protection, including one in which the federal government paid smaller producers based solely on low prices, and another that dates back to the 1930s when the government purchased milk for food banks if the price hit certain floors.
The industry asked for the change to make federal dairy insurance more like the insurance programs for wheat and corn that protect growers against catastrophic weather, Gordon said.
"What's been hitting us the last dozen years is price volatility," he said.
For example, in 2008, dairy margins -- again, the differences between milk prices and feed costs -- went from
Milk is the third most valuable agricultural commodity in
Producers "buy in" to the program at several different levels, weighing premium costs against coverage levels similar to any form of insurance.
In
They have committed to that level until 2018, when the current farm bill expires. They may increase their coverage each year, but not drop out.
"Kick the tires" is how Boguslawski described the attitude so far.
That's true, DeVries said: "I'm not really sure if this is going to be better or worse than what we had before."
However, most dairy owners agreed they needed to try something different, he said.
Twice in the last six years, margins fell below the
When they bottomed out at below
He and the rest of his industry may see similar tough times next year. He anticipates milk prices dropping by as much as 40 percent by the end of January.
Dairy needs backup plans that other agricultural producers often don't, he said.
"With cows, you can't just shut off the milk," he said.
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