The U.S. House Committee on Agriculture passed the Agriculture and Nutrition Act of 2018 (ANA18) out of committee on April 18, 2018. This farm bill text provides the first concrete idea of potential changes that could be made in federal dairy policy that strengthens the safety net for dairy farmers. In the end, final dairy policy may be different than this version, but ANA18 provides possible solutions to the problems that have plagued the original Margin Protection Program for Dairy (MPP-Dairy).
Re-evaluate feed costs
ANA18 provides for studies related to the feed cost component of the MPP-Dairy margin calculation. The U.S. Secretary of Agriculture is required to provide a study that address how well the current MPP-Dairy feed cost calculation is representative of actual dairy feed costs within 60 days after enactment of ANA18. In addition, USDA is required to evaluate the cost of corn silage relative to the cost of corn and report a high-quality alfalfa price using data from the top five milk-producing states. These components of ANA18 should help clarify many of the concerns that have been raised regarding the current MPP-Dairy feed cost calculation.
All or nothing
Another change made in ANA18 relates to the sign-up procedure for MPP-Dairy. Under ANA18, producers will sign up once for the life of the legislation rather than making an annual decision regarding their MPP-Dairy participation for both the amount of milk and the margin level covered. This may reduce the incentive under the annual MPP-Dairy sign-up procedure to try and focus on maximizing expected government payments relative to premium costs and shift the focus toward an appropriate safety net coverage needed by an individual dairy farm.
ANA18 provides margin coverage levels up to $9 per hundredweight (cwt.) on the first 5 million pounds of production history, with the $9 choice having a premium of 17 cents per cwt. It also provides more flexibility in terms of the percentage of production history to be covered by removing the stipulation that a minimum of 25 percent of production history must be enrolled. These two options should raise the amount of production history seeking to participate in MPP-Dairy.
ANA18 also allows more flexibility to dairy farmers in creating a stronger safety net by allowing them to use combinations of MPP-Dairy and other dairy risk management tools like LGM-Dairy (Livestock Gross Margin for Dairy) as long as the programs do not cover the same milk.
Time will tell
Dairy producers should carefully consider the changes contained in ANA18 since many of these changes to the current MPP-Dairy have been in discussion in dairy policy circles for months. A stronger safety net is at the forefront of these changes and producers will ultimately determine whether the changes result in more milk enrolling in MPP-Dairy.