Ag Policy Blog

Livestock Disaster and Dairy Provisions in the Farm Bill

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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The 2014 farm bill had not yet been signed when lawmakers started calling on USDA to get the livestock disaster programs out as quickly as possible.

Agriculture Secretary Tom Vilsack told Agri-Talk on Wednesday that he has instructed his staff to focus on those disaster programs to get the rules out as quickly as possible. "The reality is our livestock producers have waited a very, very long time for help and for resumption of these disaster programs. There are four programs in full that need to be looked at. A couple of them don’t necessarily require a lot to get implemented, but two of them will require us to go through a rule-making process. We want to be able to do that as quickly as we possibly can," Vilsack said in the radio interview.

Under Supplemental Agricultural Disaster Assistance Programs in the farm bill, USDA will be able to pay out for livestock disaster aid to producers going back to 2012. The Congressional Budget Office estimates USDA will send out $897 million in disaster payments alone for 2014. The 10-year budget score for disaster programs is projected at $3.67 billion.

Livestock Indemnity Payments: Pays up to 75% of the market value for livestock mortality that exceeds normal rates. That includes paying for attacks by animals or adverse weather conditions as well. Market value of the animal is based on the market value of that animal the day before its death.

Livestock Forage Disaster Program: Compensates producers for grazing losses due to drought or fire on land a producer owned, leased, purchased, sold due to drought or was a contract grower on in a county affected by drought. Payments can equal up to 60% of the monthly feed costs incurred by the producer or the feed costs calculated by the normal grazing capacity of the land. The payment rate can go up to 80% for producers forced to sell livestock because of drought. Assistance is excluded for grazing losses on land used for haying or grazing under a Conservation Reserve Program contract. The program has specific language on how a county was designated due to the National Drought Monitor. The program also has different requirements for livestock grazed on public lands.

Emergency Assistance for Livestock, Honey Bees and Farm-Raised Fish: USDA can use up to $20 million for emergency relief for farmers whose livestock, honey bees or farm-raised fish have been decimated by diseases.

Tree Assistance Program: Payments can be made for orchards that lost at least 15% of their trees and will reimburse up to 65% of the costs of replanting those trees beyond those 15% losses. The Tree Assistance Program has a $125,000 payment cap.

Repealed: The Supplemental Revenue Assistance Program (SURE) was not reauthorized for grain producers.

In signing up for these disaster programs, USDA is encouraged to give some flexibility to producers going back to 2012 and give them time to compile the necessary information for signup.

Dairy Provisions in the Farm Bill

Leading into farm-bill talks, the Congressional Budget Office baseline for dairy programs was set at $284 million over 10 years. That included MILC payments and other provisions. CBO raised the 10-year budget score for dairy in the new farm bill to just under $1.2 billion with the addition of the Margin Protection Program.

The controversial Dairy Market Stabilization Program was dropped in the final version of the bill.

The bill eliminates the price support program and export incentive program are eliminated, as it’s the federal milk marketing order commission set up in the last farm bill. Milk Income Loss Contract Program (MILC) also terminates once USDA establishes the Margin Protection Program.

Margin Protection Program: This program is effectively a dairy insurance program that will be run through the Farm Service Agency. It will pay farmer based on feed margin protection levels that the farmers choose.

By Sept. 1, USDA will have to create the margin production program. USDA will determine the national average feed costs, factoring in the price of corn, soybean meal and alfalfa. Those feed costs will be used to calculate the actual dairy production margins based on feed costs for consecutive 2-month periods subtracted from the all-milk prices for those two months. The Margin Protection Program will have an annual signup. If a farmer has more than one dairy operation, each one will have to enroll separately. Also, to enroll in the program, a dairy farmer must pay a $100 signup fee for each operation enrolled. Also, enrollment in the margin program will be based on production history from 2011-2013. Two optional formulas will be used for new dairy operations.

Dairy operators will have to choose coverage levels based on dollar figures ranging from $4-$8 coverage levels and a percentage of coverage ranging from 25% to 90% of production history. Farmers collect a payment when the actual production margin for two consecutive months is less than the coverage level selected by the dairy.

Premium costs per cwt are based on whether a dairy produces more or less than 4 million pounds of milk per year. For those under 4 million pounds, the premiums range from zero at $4 coverage levels up to 47.5 cents per cwt at $8.00. For every level of coverage except $8, the premium is also reduced 25% for 2014-2015.

For farmers marketing more than 4 million pounds of milk, the premiums range from zero at $4 coverage levels up to $1.36 cwt at $8 coverage level.

Dairy Product Donation Program: When margins fall below $4 for consecutive months, USDA must start buying dairy products for the next three months or until margins move higher. USDA then would distribute those food items to local food banks on non-profit groups.

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