Like Sisyphus’ eternal struggle to roll the boulder up the mountain, regaining dairy farmer trust in the Dairy Margin Protection Program (MPP) will be an up hill push.

Changes to the Dairy MPP might eventually make it more palatable to risk-averse dairy farmers. But that same aversion to risk, and MPP’s failure to deliver the past two years, make it a Sisyphean struggle. Ironically, it will take several years of down markets to prove to farmers changes actually work.

The Senate Appropriations committee has already approved a few tweaks, which if they survive, could be in place for 2018:

  • Change the margin calculation to a monthly rather than bi-monthly, thus improving chances of indemnities when milk-feed margins drop below $8.
  • Increase the threshold for Tier I farms from 4 million pounds of annual milk production to 5 million pounds. This roughly equates going from 185 cows to 225 cows.
  • Tier I premiums would also be reduced.

The American Farm Bureau Federation (AFBF) has also suggested numerous revisions for the next farm bill starting in 2019. These, too, are designed to make the program more palatable to farmers while still fitting it into tight budget constraints. Among the changes, AFBF wants to increase the feed ration formula 10%, as in the original 2014 farm bill. But it would also lower the maximum margin coverage level from $8 to $7 and increase the catastrophic margin level from $4 to $4.50.

The National Milk Producers Federation has not laid out its entire package of proposed changes, but it, too, wants Congress to go back to the original feed formula. Others, such as Con. Collin Peterson, D., Minn., the ranking member on the House Agriculture Committee, want to target the MPP to smaller, Tier I producers.

A revised Congressional Budget Office baseline, upping the allowed spending from about $50 million to $70 million per year, will help. But it still likely won’t be enough to allow a change in the feed formula. And even if the feed formula is changed back to its original design, skeptical farmers aren’t likely to take it at face value.

They’ll have to be shown the changes and the tweaks deliver as promised. And given the volatility of commodity markets, it could be several years for all of this to play out. Right now, there’s hope an improving economy will continue to strengthen demand both here and overseas. That should bode well for milk prices, and given modest feed prices, milk-feed margins could remain above $8 even if the feed formula is changed.

After several years of disillusionment with MPP, it will take several more for dairy farmers to regain confidence in the program. That is, if they ever do. 

 

Note: This story appeared in the September 2017 issue of Dairy Herd Management.