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There is much talk these days of the economic crisis of the Milk Income Loss Contract, or MILC Program, and the validity of its role in providing assistance to the dairy farmers who have reached the end of their limits.
The MILC Program began its evolution with the Agricultural Act of 1949, when it first established the dairy price support program by permanently requiring the USDA to support the farm price of milk. Since then, Congress has regularly amended this program, usually by adding in the language to multi-year farm or budget reconciliation acts. The MILC Program made its latest transformation in the 2008 Farm Bill, when the senate reauthorized the program to run through September 30, 2012.
The USDA Farm Service Agency (FSA) supports the dairy industry through the provision of a monthly counter-cyclical style payment to milk producers whenever the price for fluid milk drops below the benchmark price of $16.94 per hundredweight (cwt) on the Boston Federal Milk Marketing Order for Class I. With the passing of the 2008 Farm Bill, the set cost of $16.94 per cwt was changed to a variable cost, which could fluctuate monthly, its variations due to feed cost, kicking in when those costs went above $7.35 per cwt of a 16 percent protein feed ration. MILC payment rates are issued to eligible dairy operations when the Boston Class I price falls below the feed-cost adjusted trigger point.
Dairy farmers were dealt a blow earlier this year when the price per cwt dropped drastically. It went from $18.99 in January down to $13.97 in February, finally bottoming out in March at $12.68 per cwt. Since March there has been a slight fluctuation of that figure, and in the month of July, the price paid out per cwt is $13.51. To clarify the numbers, the Farm Bill has a set price of $16.94. From that figure, they subtract the actual price paid out per cwt. Using July’s figure of $13.51, you have a remainder of $3.43. From that figure, the government pays out 45 percent, which comes out to $1.54 per cwt. With cost of production soaring ever higher in this financially difficult time, farmers spend nearly twice the amount of the $13.51 they were paid in July simply to produce the milk.
Feed costs, farm and equipment maintenance, as well as herd maintenance are all a part of the cost of production for the farmers, who are losing money hand over fist with each gallon of milk produced. “You don’t have to be a math whiz to figure out that if it costs us twice as much as we are being paid to produce milk, we are losing money,” said local dairy farmer David Fitch, “And that 45 percent they are paying out does not go very far.” According to Fitch, the average dairy farmer this year is losing approximately $15,000 monthly with the system in its current state.
New York State Senator Kirsten Gillibrand in June introduced a bill to the senate designed to help farmers who are struggling with these low prices. Currently, the MILC Program is paying farmers approximately 45 percent of their production costs, Gillibrand’s bill would double the amount received by farmers to around 90 percent of cost. The increase would be retroactive back to the month of March. The first New York senator in 40 years to be a member of the Senate Agricultural Committee, Gillibrand has been very vocal in her support for the plight of the dairy farmers, both in New York state and around the country.
The MILC Program currently cuts off payments after the first 2.98 million pounds of a farmer’s production. This is an average weight of production for average dairy farmers, which places significant hardship on the larger scale dairies.
“A lot of people do not care for large-scale farming,” said Fitch, “But that does not change the fact that the way the program is set up is totally inequitable. It is not fair to punish the larger scale dairy farms by setting that production cap. It should be something that works for everybody.”
Because of the way that farmers are paid for their product, they are often forced to increase their herd size just to make ends meet. One local farmer stated that 20 years ago, you could make a decent living milking a herd of around 35 cows, but now, in order to even be viable in the dairy business, a farmer needs to have 70+ milking cows just in order to keep their heads above water. But with the MILC Program’s enforced 2.98 million pound cap, over production of milk results in loss of payment for the farmer’s who go over that limit.
Farmers are asked at the beginning of each year, to speculate on when they would like to receive MILC payments for their milk. Dairy farmers often stagger their milk production times, with few operating at full milking capacity year-round. Therefore, farmers are asked to forecast which months they deem it will be necessary to receive payment, and submit their paperwork early in the year.
“In addition to everything else a farmer must do, now we have to be fortune tellers too, trying to look into a crystal ball to determine what the year is going to be like,” said Fitch. But milk production has many variables that can affect it, including weather, feed cost and availability, and often farmers are left holding the bag when it comes to MILC payouts. One result of this system is the selling off or extermination of cows by farmers who realize that their milk production is going to exceed the MILC Program cap. According to Fitch, more than 60,000 cows this year will be slaughtered due to this current program.
“Anybody who looks at it can see that this program is not working,” said Fitch, “It sometimes feels like the government’s main goal in this situation is to keep the farmers divided.”
In fact, many farmers are opposed to the MILC Program, not only because it is not working for them, but it is also not working for the taxpayers. “I would estimate that this program is costing taxpayers more than $800 million per year, and no one seems to know where this money is going,” said Fitch. “What the taxpayers need to know is that many farmers simply do not want the MILC Program,” he continued, “It is not working for us, and it is not working for them.”
In addition, the 45 percent that the government pays is based on what is called Class I milk, which is fluid milk. According to Pro-Ag member and dairy activist Arden Tewksbury, only 35 percent of all milk produced in the country is utilized in its fluid state. The rest becomes Class II, which is cheese, butter and dry milk products. About 16 billion pounds of milk products are generated from the United States each year, but only around 5.6 billion pounds of that falls under the Class I status. “We are losing money all around,” said Tewksbury, “Its just that simple.”
More and more farmers are beginning to see that the MILC program is, in Fitch’s words, “A Band-Aid on a gaping wound.” Long-time agricultural proponent Senator Arlen Specter of Pennsylvania, along with Senator Bob Casey have drafted a bill to go before the senate that demands a more equitable pricing system be put into place for dairy farmers. Bill s-889 calls for the farmers to receive at least the cost of production of their product, which would help the many farmers who are struggling to find a sense of balance. The bill has yet to clear the senate, but regional and national dairy farmer organizations continue to believe that if a change is going to happen it is going to have to come from the Congress.
There is much talk these days of the economic crisis of the Milk Income Loss Contract, or MILC Program, and the validity of its role in providing assistance to the dairy farmers who have reached the end of their limits.
The MILC Program began its evolution with the Agricultural Act of 1949, when it first established the dairy price support program by permanently requiring the USDA to support the farm price of milk. Since then, Congress has regularly amended this program, usually by adding in the language to multi-year farm or budget reconciliation acts. The MILC Program made its latest transformation in the 2008 Farm Bill, when the senate reauthorized the program to run through September 30, 2012.
The USDA Farm Service Agency (FSA) supports the dairy industry through the provision of a monthly counter-cyclical style payment to milk producers whenever the price for fluid milk drops below the benchmark price of $16.94 per hundredweight (cwt) on the Boston Federal Milk Marketing Order for Class I. With the passing of the 2008 Farm Bill, the set cost of $16.94 per cwt was changed to a variable cost, which could fluctuate monthly, its variations due to feed cost, kicking in when those costs went above $7.35 per cwt of a 16 percent protein feed ration. MILC payment rates are issued to eligible dairy operations when the Boston Class I price falls below the feed-cost adjusted trigger point.
Dairy farmers were dealt a blow earlier this year when the price per cwt dropped drastically. It went from $18.99 in January down to $13.97 in February, finally bottoming out in March at $12.68 per cwt. Since March there has been a slight fluctuation of that figure, and in the month of July, the price paid out per cwt is $13.51. To clarify the numbers, the Farm Bill has a set price of $16.94. From that figure, they subtract the actual price paid out per cwt. Using July’s figure of $13.51, you have a remainder of $3.43. From that figure, the government pays out 45 percent, which comes out to $1.54 per cwt. With cost of production soaring ever higher in this financially difficult time, farmers spend nearly twice the amount of the $13.51 they were paid in July simply to produce the milk.
Feed costs, farm and equipment maintenance, as well as herd maintenance are all a part of the cost of production for the farmers, who are losing money hand over fist with each gallon of milk produced. “You don’t have to be a math whiz to figure out that if it costs us twice as much as we are being paid to produce milk, we are losing money,” said local dairy farmer David Fitch, “And that 45 percent they are paying out does not go very far.” According to Fitch, the average dairy farmer this year is losing approximately $15,000 monthly with the system in its current state.
New York State Senator Kirsten Gillibrand in June introduced a bill to the senate designed to help farmers who are struggling with these low prices. Currently, the MILC Program is paying farmers approximately 45 percent of their production costs, Gillibrand’s bill would double the amount received by farmers to around 90 percent of cost. The increase would be retroactive back to the month of March. The first New York senator in 40 years to be a member of the Senate Agricultural Committee, Gillibrand has been very vocal in her support for the plight of the dairy farmers, both in New York state and around the country.
The MILC Program currently cuts off payments after the first 2.98 million pounds of a farmer’s production. This is an average weight of production for average dairy farmers, which places significant hardship on the larger scale dairies.
“A lot of people do not care for large-scale farming,” said Fitch, “But that does not change the fact that the way the program is set up is totally inequitable. It is not fair to punish the larger scale dairy farms by setting that production cap. It should be something that works for everybody.”
Because of the way that farmers are paid for their product, they are often forced to increase their herd size just to make ends meet. One local farmer stated that 20 years ago, you could make a decent living milking a herd of around 35 cows, but now, in order to even be viable in the dairy business, a farmer needs to have 70+ milking cows just in order to keep their heads above water. But with the MILC Program’s enforced 2.98 million pound cap, over production of milk results in loss of payment for the farmer’s who go over that limit.
Farmers are asked at the beginning of each year, to speculate on when they would like to receive MILC payments for their milk. Dairy farmers often stagger their milk production times, with few operating at full milking capacity year-round. Therefore, farmers are asked to forecast which months they deem it will be necessary to receive payment, and submit their paperwork early in the year.
“In addition to everything else a farmer must do, now we have to be fortune tellers too, trying to look into a crystal ball to determine what the year is going to be like,” said Fitch. But milk production has many variables that can affect it, including weather, feed cost and availability, and often farmers are left holding the bag when it comes to MILC payouts. One result of this system is the selling off or extermination of cows by farmers who realize that their milk production is going to exceed the MILC Program cap. According to Fitch, more than 60,000 cows this year will be slaughtered due to this current program.
“Anybody who looks at it can see that this program is not working,” said Fitch, “It sometimes feels like the government’s main goal in this situation is to keep the farmers divided.”
In fact, many farmers are opposed to the MILC Program, not only because it is not working for them, but it is also not working for the taxpayers. “I would estimate that this program is costing taxpayers more than $800 million per year, and no one seems to know where this money is going,” said Fitch. “What the taxpayers need to know is that many farmers simply do not want the MILC Program,” he continued, “It is not working for us, and it is not working for them.”
In addition, the 45 percent that the government pays is based on what is called Class I milk, which is fluid milk. According to Pro-Ag member and dairy activist Arden Tewksbury, only 35 percent of all milk produced in the country is utilized in its fluid state. The rest becomes Class II, which is cheese, butter and dry milk products. About 16 billion pounds of milk products are generated from the United States each year, but only around 5.6 billion pounds of that falls under the Class I status. “We are losing money all around,” said Tewksbury, “Its just that simple.”
More and more farmers are beginning to see that the MILC program is, in Fitch’s words, “A Band-Aid on a gaping wound.” Long-time agricultural proponent Senator Arlen Specter of Pennsylvania, along with Senator Bob Casey have drafted a bill to go before the senate that demands a more equitable pricing system be put into place for dairy farmers. Bill s-889 calls for the farmers to receive at least the cost of production of their product, which would help the many farmers who are struggling to find a sense of balance. The bill has yet to clear the senate, but regional and national dairy farmer organizations continue to believe that if a change is going to happen it is going to have to come from the Congress.
