The Race to Help Dairy Farms

Struggling Smaller-Dairy Farmers Told to Hang On as USDA Prepares Latest Dairy Fix

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Dairy cows on a Michigan farm take in a mid-afternoon feed. Dairy farmers have been challenged by low prices since 2014. Leaders in dairy policy are encouraging bankers to help keep farms afloat until the new Dairy Margin Coverage program kicks in this summer. (DTN file photo by Chris Clayton)

WASHINGTON (DTN) -- The survival of thousands of smaller dairy farmers rides on the success of the latest program designed to save them as dairy farmers right now continue going out of business at a rapid clip.

Struggling dairy farmers and their bankers are being told to just hold on until this summer when USDA will finally be ready to sign up dairy producers for the Dairy Margin Coverage program.

"This program isn't perfect, but it's the best thing that we've had in dairy in a long time," said House Agriculture Committee Chairman Collin Peterson, D-Minn. "It will keep these small guys in business, and that's the purpose of it."

The Dairy Margin Coverage payment program is going to be retroactive until the beginning of the year, but it's unclear how many people know that. Peterson said this week he's been meeting with bankers and others in Minnesota and Wisconsin to explain the program and payments. He led a bipartisan letter with more than 70 House members in late March calling on USDA to prioritize implementation of the DMC program. Days later, the Senate followed up with a similar letter by 38 senators calling for the same thing.

"So I'm worried about that, and I still don't think it should take them until June to get this program rolled out," Peterson said. "I've been pushing the department hard on this because we are losing dairy farmers as we speak. They have had a tough time, and a lot of them are giving up."

Agriculture Secretary Sonny Perdue told the House Appropriations Ag subcommittee that it would be impossible to move up the signup date for the new dairy program, now set for June 17. But Perdue added the program should be a "no-brainer" for farms with fewer than 250 to 300 cows.

Sarah Lloyd, a dairy farmer who milks about 350 cows with her husband and family near the Wisconsin Dells, was among roughly three dozen Wisconsin farmers who drove to a family-farm rally late last month in Storm Lake, Iowa, largely to draw attention to the plight of dairy farmers. She is worried she and her husband won't be milking cows by the end of this year. Lloyd just saw a headline this week in a dairy magazine, "Help is on the Way." She also just watched a whole herd sold off at a nearby farm. Lloyd is skeptical that a revamped version of the old dairy program is going to help people, especially if they have to wait until June to sign up and July to get a payment.

"The USDA folks are just saying, 'We've got this farm bill through and you should be glad because payments will catch up with people.' But we know things are really dire," Lloyd said. "We know that when we lose these small- to medium-scale farmers, we're not going to get those farms back. As a dairy farmer and a rural community member, I want to see a distributed structure of production. More farms, not fewer farms."

Nationally, overall, dairy revenues are down 24% since 2014, and dairy income has not recovered as well as other commodities, even corn or soybeans.

"Dairy has struggled and its struggles are disproportionate compared to other commodities," said Alan Bjerga, senior vice president of communications for the National Milk Producers Federation.

NMPF, which represents 28 dairy cooperatives around the country, sees the changes in the 2018 as providing margin protection for dairy farmers that actually works, Bjerga said. Besides the DMC, there are now other programs such as Dairy Revenue Protection insurance being offered for larger dairy farmers as well. Like Peterson, Bjerga said the dairy industry is counting on some immediate leniency from lenders until the DMC fully kicks in. Payments could go out as early as July 8.

"The hope is that, even if these payments aren't coming now, bankers know they will be," Bjerga said

USDA will be rolling out a decision tool possibly next week for the DMC. Peterson said he's seen a preview of it and he thinks USDA has overcomplicated the options for farmers.

"I think they are going to confuse farmers," Peterson said. "They are laying this out as if there is some big choice that needs to be made."

The way Peterson sees it, farmers who milk under 5 million pounds a year would best protect their revenue by choosing 95% coverage at the top level of $9.50 coverage. Further, farmers who sign up for five years will get a 25% premium discount as well.

"It will literally give producers five years of gross revenue that they can count on to keep them in business," Peterson said.

But smaller dairy farmers want more fundamental changes in dairy pricing after losing an average of seven dairies nationally every day last year -- more than 2,500 total. Lloyd and members of the Wisconsin Farmers Union are working with the National Farmers Organization, holding meetings in major dairy-producing states to highlight different options to help farmers, including supply management programs and direct payments to smaller producers. (…)

"We're in a disaster and we need to put something out there to catch people's fall," Lloyd said. "We know that we need fundamental price policy reform, and we know that's going to take a couple of years to get the political will together to do that. Meanwhile, we're bleeding all of these family farms and that's not acceptable."

Roger Johnson, president of National Farmers Union, has been explaining to his members that a fundamental change such as managing or controlling milk supplies would have to come from the grassroots or state level. The 2014 farm bill initially had a modest supply management provision that offered farmers higher protection levels if they agreed to cut production. That idea was killed on the floor by then-Speaker John Boehner, R-Ohio, called it "Soviet-style" production.

"Internally, in Farmers Union, the dairy voice is really loud, and they have been arguing that we need to get supply management to Congress," Johnson said. "My response is that's not going to happen unless it comes from the countryside."

Pursuing supply management in 2014 "was a mistake" because dairy farmers were stuck when the policy got rejected, Bjerga said. While adding that NMPF would "welcome the discussion," Bjerga added that NMPF "has a lot of constituencies" that would resist supply management. Dairy farmers got a better deal in the 2018 farm bill because the industry was more united than 2014.

"The goal in 2018 was to get dairy all on the same page," Bjerga said.

Peterson believes that once USDA gets the dairy program going, it will finally prove a winner for smaller dairy farmers. He expects the criticism in two years is doing something that was "too good" for dairy producers. So his message to dairy farmers now is: "Don't give up. Wait until you can sign up in June before you give up the ghost."

Farmers that qualify for the maximum enrollment or under only produce about 14% of the nation's milk, Peterson said. That should help avoid further overproduction.

"Even if they go hog wild and start increasing, they aren't going to really increase the milk supply," he said.

With some farmers getting out, Peterson said he sees an opportunity for young people to step into the business because cows are cheap, and there are empty dairy parlors out there to rent or buy. The farm bill also offers more incentives for new and beginning farmers to get into dairy production.

"You are never going to have a time like this to get into dairy and basically have a five-year guarantee on your gross revenue," he said.

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Chris Clayton