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2014 Farm Bill Provides New Risk Management Tool for Dairy Farmers


Dairy cows eating in barnThe Agricultural Act of 2014, also known as the Farm Bill, ushered in major changes to the dairy programs contained in Subtitle D. These represent a shift toward programs that look similar to the traditional crop and revenue insurance programs contained in Title XI. The centerpiece is a new Dairy Margin Protection Program (DMPP) for producers. It’s intended to protect against falling milk prices, rising feed prices, or a combination of both. This report provides an overview of key dairy program changes plus details and an example of the new DMPP.

Highlights



  • DAIRY MARGIN PROTECTION PROGRAM (DMPP). Dairy producers can enroll in new standardized margin protection coverage that makes a payment based on the producer’s chosen coverage level. The payment is equal to the difference between the coverage level and the standardized milk margin over feed costs (called Actual Dairy Production Margin, or ADPM) when the margin falls below the producer’s elected coverage level.

  • DAIRY PRODUCT DONATION PROGRAM. This is another new program, also part of Subtitle D, which requires the Secretary of Agriculture to implement the program whenever the ADPM falls below $4 per hundredweight. Under this program, the USDA would purchase dairy products for distribution to food banks and other donation programs. The USDA is prohibited from paying for storage of these products, and the organizations receiving these products must agree to not resell them into commercial channels.

  • OTHER DAIRY PROGRAMS. Subtitle D effectively ended the Milk Income Loss Contract (MILC) Program on September 1, 2014. Other programs repealed under Subtitle D are the Dairy Product Price Support Program, the Dairy Export Incentive Program and the Federal Order Review Commission. Extended and reauthorized under Subtitle D are the Dairy Forward Pricing Program, the Dairy Indemnity Program, and the Dairy Promotion and Research Program.


Information in this post was provided by AgriBank. AgriBank is FCS Financial’s funding source. It is one of the largest banks within the national Farm Credit System, with more than $80 billion in total assets. Under the Farm Credit System’s cooperative structure, AgriBank is owned by 17 affiliated Farm Credit Associations. The AgriBank District covers America’s Midwest, a 15-state area from Wyoming to Ohio and Minnesota to Arkansas. More than half of the nation’s cropland is located within the AgriBank District, providing the Bank and its Association owners with exceptional expertise in production agriculture. For more information, visit www.AgriBank.com.

 
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