Bipartisan Budget Act Includes Dairy Policy Improvements

 

Early this morning the Congress passed, and the President has now signed into law, the Bipartisan Budget Act of 2018 (H.R. 1892).  This package sets federal spending levels for the next two years and contains a variety of provisions, including dairy policy changes affecting the 

Margin Protection Program and USDA dairy risk management programs.

As you know, for some time we have been working closely with our allies in Congress to secure necessary improvements to the MPP as well as expanded access to risk management tools for dairy producers.  While much of this effort has taken place in the context of the next Farm Bill, we have been pursuing multiple paths to achieve our policy goals. Because of the budget challenges presented by Farm Bill spending limits, Congressional consideration of a supplemental spending bill relating to disaster assistance afforded us a unique opportunity to pursue dairy policy changes in advance of the Farm Bill. A similar need for improved farm program policy facing cotton producers provided added impetus to help garner bipartisan and bicameral support for our efforts.

The bill just passed and enacted into law includes many of the needed MPP reforms and expanded risk management program options that were identified by NMPF’s Economic Policy Committee and subsequently adopted as policy recommendations by the NMPF Board.  Taken together, these policy changes will provide meaningful options for producers of all sizes. The changes will be very helpful heading into the 2018 Farm Bill where new budget resources are expected to be limited.

Specifically, the package would:

 

  • Raise the catastrophic coverage level from $4.00 to $5.00 for the first tier of covered production for ALL dairy farmers.  Recall that we had discussed restoring the 10 percent cut to the MPP feed formula, which is currently distorted by roughly one dollar.  Adjusting the coverage levels is another way of solving that same problem, so Congress has taken a first step in the right direction here.

 

  • Adjust the first tier of covered production to include every dairy farmer’s first five million pounds of annual milk production (about 217 cows)instead of four million pounds, a recognition of the growth in herd sizes across the country.  This issue came up in our discussions as well as in Congress over the past year.

 

  • Reduce the premium rates for every producer’s first five million pounds of production, to better enable dairy farmers to afford the higher levels of coverage that will provide more meaningful protection against low margins.  No changes were made to the second tier of premiums.  Below is a comparison of the old and new rates for the first tier:

 

Margin                       Original Rate                    New Rate

  • $4.00                                    -                                       -
  • $4.50                                0.010                                  -
  • $5.00                                0.025                                  -
  • $5.50                                0.040                              0.009
  • $6.00                                0.055                              0.016
  • $6.50                                0.090                              0.040
  • $7.00                                0.217                              0.063
  • $7.50                                0.300                              0.087
  • $8.00                                0.475                              0.142

 

  • Modify the margin calculation to a monthly (from bi-monthly) basis, to make the program more accurate and responsive to producers in difficult months.

 

  • Waive the annual $100 administrative fees for “underserved” farmers.

 

  • Direct USDA to immediately reopen the program signup for 2018.  We will be working with USDA (and asking Congress to assist) to begin this process as quickly as possible, with clarity and flexibility for producers and field offices.

 

  • Remove the $20 million annual cap on all livestock insurance, including the Livestock Gross Margin-Dairy program.  This will allow USDA to develop and/or approve additional risk management tools for dairy producers that can complement MPP-Dairy, and will likely be of particular interest to larger producers to provide additional risk management assistance.

We believe the reforms enacted in this package will ensure that MPP provides more effective coverage for producers while also expanding the availability of meaningful risk management options for farmers, similar to the options enjoyed by producers of other commodities. 

The conclusion of this legislative effort puts us in a much better position going into the upcoming Farm Bill.  We look forward to discussing all of these issues with you at our March Board Meeting. In the meantime, we’ll provide you with additional communications materials to share with your members early next week.

I want to thank you and your members who have helped throughout this process. These changes happened as a result of a sound strategy and concerted outreach efforts by many in the dairy community.  Your contacts with members of Congress were very helpful in ensuring the dairy provisions made it into the final package, and in gaining majority support for the budget deal in both the House and Senate. This was truly a team effort.

Please don’t hesitate to reach out to me or Paul Bleiberg ( This email address is being protected from spambots. You need JavaScript enabled to view it. ) if you have any additional questions.

 

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