Rep. Welch Wants Changes To A Dairy Protection Program That Isn't Working

Apr 18, 2016

Rep. Peter Welch is co-sponsoring a bill that will make changes to the program that's supposed to be a safety net for dairy farmers in times of low milk prices.

The Dairy Margin Protection Program acts as a sort of insurance against low milk prices. Farmers buy policies that ensure a level of payment to cover production expenses above feed costs.

But the program is pegged to the price of feed sold by grain farmers, mostly in the Midwest, as a stand-in for the price farmers pay for feed. Bob Wellington, an economist with the dairy cooperative Agri-Mark, says the real price of feed is higher.

“Farmers signed up for coverage in 2014, but just about nobody got any coverage because the feed prices are distorted," he said. "This bill directs USDA to look at and calculate the feed cost that farmers are truly paying on a state-by-state basis."

It's a good program, Wellington said, but needs modifications to actually work for farmers, and it needs to calculate feed costs by region.

He says if farmers signed up for high-level coverage, it's possible to get payments.

“Most farmers didn’t sign up for the higher levels. They signed up last year and they got nothing even though they have very low prices. When they were going to sign up this year, they said, 'Why should I pay extra?' They don’t trust the program. We have to make this program a better deal for farmers so it actually works for them,” he said.

Earlier this week the USDA made some changes that make it easier for farmers to increase their protection level.

"They signed up last year and they got nothing even though they have very low prices. When they were going to sign up this year, they said, 'Why should I pay extra?' They don't trust the program. " - Bob Wellington, Agri-Mark

While milk prices are down, they are unlikely to fall as far the record lows in 2009. But with other costs up, Wellington says small and medium farms continue to be in danger of closing, and that has economic ripple effects.

“New England needs a certain amount of farms to have a critical mass to support all of the other suppliers that farmers need, to make sure you have feed dealers, equipment dealers, veterinarians," he said. "Once you get past a threshold level of those farms, those people disappear as well. And then the remaining farms have much higher costs."

Even with the loss of some dairy farms, Wellington says Agri-Mark is taking in record amounts of milk from its farmer members, as the remaining farms continue to increase in size.

UPDATE 8:37 p.m, April 18: Story was updated to delete reference to rising fuel prices.