January 31, 2014 – Dr. Brian Gould doesn’t agree with the Wall Street Journal’s assessment that dairy farmers are losers in the new Farm Bill. Speaking in Friday’s DairyLine broadcast, Gould said the Margin Insurance Program was one of the things dairy producers, via the National Milk Producers Federation, wanted. “That’s not a loss,” he said. “It’s going to be more market driven and there’ll be more producer decision making involved.” Gould said “The strength is individual decision making in terms of participating in that margin insurance program and there’s no requirement.”
One of his issues with the dairy title is that, if producers participate in the USDA Margin Program they’re not allowed to participate in the Livestock Gross Margin (LGM) program. He’s not sure why but says, perhaps it’s because they are both subsidized.
The LGM is a revenue insurance program for dairy producers that has been around since August 2008, according to Gould, and is used to set minimum margin floors. It’s very similar to the USDA Margin Program but is more flexible, he said, can be entered into multiples times per year, and the costs are comparable at least at the upper coverage levels to what the USDA premiums are.
As to the Margin Insurance Program, Gould said national average prices are used, no local bases. The premiums are differentiated by farm size, in terms of your history, with 4 million pounds or less considered a smaller operation, and anything over 4 million considered larger and will have a different premium schedule. Gould’s understanding is that the premiums for the $4 margin are 100% subsidized but anything else in 2014 and 2015 there will be a 25% reduction in the premiums for smaller operations.
The dairy title is fairly short, Gould concluded. A lot of rules in terms of development are left up to the Secretary of Agriculture. As an example, Gould said it’s not clear whether a farmer has to enter once for five years or once a year and “that has some significant implications in terms of risk management activities.”