Here & Now

How to Protect Wisconsin Dairy Producers if Prices Fall

Frederica Freyberg:

Now to ag news. Small dairy farms in Wisconsin continue to struggle as milk prices remain low, but dairy farmers just got an extension to sign up for a federally-run insurance program designed to help when milk prices take a dive. That extension, though, runs out tonight, June 8. Andy Soth has more on the Margin Protection Program.

Andy Soth:

Trempealeaus town hall shares its facility with the local curling club. But on this afternoon it’s also hosting a meeting of dairy farmers.

Mark Stephenson:

So the payments that you’re due will be coming more quickly.

Andy Soth:

Theyve gathered to learn more about recent changes to the Margin Protection Program, the federally-run insurance programs that aids dairy farmers when milk prices are low.

Mark Stephenson:

It’s 100% probability that would be covered at these levels.

Andy Soth:

The speaker is the director of the UW’s Center for Dairy Profitability, Mark Stephenson, who’s very familiar with historic efforts to support dairying.

Mark Stephenson:

Weve had different programs over time, going clear back to the 19 — late 1930s, early ’40s. We had a Dairy Price Support Program. And the idea there was that the government would purchase dairy products off the marketplace when market prices were low. And that was something that aimed to improve market prices themselves. It wasn’t for an individual farmer. It was to move prices up for everybody.

Andy Soth:

When that program was judged too expensive, it was replaced with the Milk Income Loss Contract or MILC program.

Mark Stephenson:

And this was just a direct payment to dairy farms. If prices fell to a certain level, we would just write you a check and say here you go. This is because it’s hard for you.

Andy Soth:

That program was replaced in the 2014 Farm Bill by the Margin Protection Program. To come up with the margin, economists worked with dairy nutritionists to calculate how much feed it takes to produce 100 pounds of milk. 90% of the price for that feed is subtracted from the marketplace for a milk hundredweight. That makes up the margin from which the farmer pays other expenses. When the margin is small, as it was in this example for March of this year, any profit is unlikely. The Margin Protection Program kicks in when that margin is $8 or less, providing payments for producers depending on the level of protection they’ve bought into.

Mark Stephenson:

So it is an insurance type product. Farmers have to make a decision about how much protection do I need, just like we would for auto insurance or fire insurance, and you hope you don’t have an accident, but if you do, then it should pay.

Andy Soth:

Recently, it has paid.

Mark Stephenson:

And Im here to tell you we now know what the first three months are, and two of those months would have had payments.

Andy Soth:

But many dairy producers were not enrolled. So changes to the program enacted in February as part of continuing federal funding legislation essentially gave some farmers a do-over. Not only was the time frame to sign up reopened, but benefits can be claimed even for the time before farmers enrolled.

Mark Stephenson:

This is unusual because it’s retroactive. We get to go back and make a decision about the entire year and we already know that we would be receiving payments at some of these levels of protection. The nickel and a half that it costs you to buy additional up to this level of coverage in premiums is covering another 50 cents worth of payments, okay? So I spend a nickel, I get 50 cents. That’s the one time that you won’t hear an economist going, you know, on the other hand. No. There is no other hand here.

Andy Soth:

The program is hardly a panacea for the many factors troubling the dairy industry. But every little bit can help. Which is why it was so important to get the word out.

Mark Stephenson:

There’s been a big educational effort to try to get back out and tell farmers about that and that they need to go back and rethink their enrollment.

Frederica Freyberg:

Support for Andy Soth’s report was provided by the O’Brien Fellowship in Public Service Journalism and Marquette University.