Dairy Farms Will Have “Margin Insurance” in New Farm Bill

One of the most contentious parts of the wrangling over the new farm bill (not yet passed, but out of conference yesterday) centered around support for dairy farmers.  The National Milk Producer’s Federation had lobbied for a “supply management” provision, however, House Speaker Boehner had argued that this was simply a “Soviet-style” economic planning.

In the final conference committee bill issued yesterday, the supply management provision has been dropped.  Instead, there is a new “margin” management system that will be in place starting September 1, 2014.  A dairy farmer could participate in this new margin system or the current one allowed under the crop insurance, but not both.  The new bill also eliminates the current 70 year price support system.

If a dairy farmer has less than 200 cows, the bill provides additional incentives with a 25% reduction in premiums for the first two years of the program.  Producers could elect to cover 25% to 90% of their production base on margins ranging from $4 to $8 per CWT, in 50 cent increments.

The bill also provides for a Dairy Product Donation Program that will buy products at market prices when the margin falls below $4 per CWT for two consecutive months.

Although this bill is not yet final, it has been passed out of conference onto the House and Senate for a final vote and it most likely should pass (only two years late).  We will update you on other provisions over the next few days.

Here is additional information on the Dairy Management Plan.

Paul Neiffer, CPA