The Dairy Indemnity Payment Program provides payments to producers should their milk become unfit for consumption because of contamination by pesticides or other toxic substances.
The Dairy Promotion and Research Program, administered by the National Dairy Research and Promotion Board, works to increase milk and dairy product demand through promotion, research, and education initiatives. Another program that continues is the Milk Price Support Program (MPSP).
Milk Price Support Program
The Agricultural Act of 1949 created the MPSP. This permanent piece of legislation was designed to set a price floor under all milk and dairy products, Dillivan explained.
"Should the market price for milk fall below the farm-level support price, MPSP directs USDA to purchase from vendors butter, cheese, and nonfat dry milk at levels that would raise the milk market price to a level no less than the support price," he said.
A USDA offer to buy dairy products at levels that exceed current market prices would provide an incentive for dairy manufacturers to sell products to the government, reducing commercial supply and raising price.
By law, the 1949 Act required that milk be supported at 75-90 percent of parity. Since 1981 however, the support price has been established by Congress either at a specific level or by formula related to expected surplus.
The 2002 Farm Bill required the Secretary of Agriculture to support the price of milk at $9.90 per hundredweight through the purchase of cheese, butter, and nonfat dry milk. The 2008 Farm Bill reauthorized MPSP as DPPSP, beginning January 1, 2008 and ending December 31, 2012. Subsequent congressional legislation extended DPPSP until it was repealed by the 2014 Farm Bill.
New Dairy Margin Programs
Rather than support prices, Dillivan explained that the main feature of dairy policy in the Agricultural Act of 2014 is the protection of producer margins.
"These gross margins are calculated as the difference between an average national milk price and a representative cost of dairy feed. Should margins fall below a producer-selected level, indemnity payments will be authorized based upon actual milk production history and a coverage level participants elect," he said.
Participating dairy producers pay premiums for the margin insurance, thereby cost-sharing with the federal government.
The two new margin protection programs, Dillivan said, are the Margin Protection Program for Dairy Producers (MPP) and the Dairy Product Donation Program (DPDP).