America’s dairy farmers are getting a refund.
So hopes Senator Kirsten Gillibrand of New York, who on Wednesday introduced a Senate bill to return millions of dollars from a disappointing federal insurance program.
Known as the Dairy Premium Reform Act of 2018, her bill would refund leftover premiums to farmers who’d paid to cover their losses under a federal margin protection program. Currently, those leftover premiums go to the Treasury. But under Gillibrand’s plan, they would be mailed back to farmers in the form of a one-time check. (The full text of the bill is here.)
Odd as it may seem (at the moment) for a Democrat to say that a federal safety net isn’t working and to propose all but scuttling it, Gillibrand’s concerns are well-founded, according to farmers and industry observers. The problem started with the last farm bill. Before that was passed in 2014, dairy farmers used to receive monthly checks, or Milk Income Loss Contract payments, whenever the price of milk dipped below a certain threshold.
Over the last two years, dairy farmers have paid approximately $100 million into the program, but received only $12 million in return.
But what replaced that system, an insurance scheme known as the Dairy Margin Protection Program, has made those payments less predictable. Now, payments are made bi-monthly, based on a nationally averaged dairy production margin. That’s the difference between milk prices and the cost of cattle feed. If the price of milk falls, that increases the likelihood that farmers will receive payments. But not when the cost of feed falls too, which is what happened last year, as Gillibrand has told local news outlets.As a result, even farmers paying the highest premiums still aren’t meeting the threshold to trigger payments. Over the last two years, dairy farmers have paid approximately $100 million into the program, but only received $12 million in return, said the American Farm Bureau. Last year, in New York state, the fourth-largest milk producer in the country, farmers received payments of around $2,243, according to United States Department of Agriculture data.
But Gillibrand’s bill is really a response to a larger issue. When the last farm bill was first passed, dairy prices, which are set by the federal government, were sky-high. New York was on its way to becoming the “yogurt capital of the world.” The price bubble burst, however, and now milk is as cheap as it’s been in decades.
What Gillibrand’s pushing for is just a band-aid until a more robust dairy “safety net” can be implemented.
That’s thought to be in part because of a years-long milk surplus from excessively productive dairy operations—which expanded during that boom—as well as wavering international demand. Last year, Canada introduced a pricing plan that incentivized its cheese processors to use Canadian milk. That almost wiped out dozens of dairy farmers in Wisconsin, but also dropped the hammer on farmers in New York, whose exports have dwindled. Over the past year, in response to those depressed prices, milk buyers across the country have been dropping contracts.
That’s taken an emotional toll nationwide. You may have read our coverage of the recent uptick in agricultural worker suicides. This month, Massachusetts dairy co-op Agri-Mark even sent its New York members phone numbers for suicide hotlines and mental health information along with the latest market forecast.
So while her constituents could certainly use some money back, Gillibrand’s bill is not a long-term solution to what’s emerging as a national problem, or generational reckoning, for dairy farmers. What Gillibrand’s pushing for is something like a stopgap or band-aid, until a more robust dairy “safety net” can be implemented, as part of the next farm bill later this year. So far, that’s looking like a billion-dollar cash infusion to dairy farmers, even though, in the midst of an oversupply, Americans don’t need any more milk.