Authored by Randy Schnepf, Congressional Research Service
The 2014 farm bill (P.L. 113-79), which was signed into law on February 7, 2014, makes significant changes to the structure of U.S. dairy support programs, including the elimination of several major price and income support programs from the 2008 farm bill (P.L. 110-246), the extension of several smaller dairy programs, and the addition of two new programs.
Three of the principal dairy support programs under the 2008 farm bill-the Dairy Product Price Support Program (DPPSP), the Milk Income Loss Contract (MILC) program, and the Dairy Export Incentives Program (DEIP)-are eliminated. These programs are replaced by two new support programs that are authorized for the five-year period of the 2014 farm bill, FY2014- FY2018-the Margin Protection Program (MPP) and the Dairy Product Donation Program (DPDP).
The MPP is a voluntary program that makes a payment to participating farmers when a formula based national margin-referred to as the Actual Dairy Production Margin (ADPM) and calculated as the national average farm price for all milk minus a national-average feed cost ration-falls below a producer-selected insured margin that can range from $4.00 per hundredweight (cwt.) to $8.00/cwt. in $0.50/cwt. increments. According to USDA final rules (released August 29, 2014), MPP payments are based on a farm-level production history and a producer-selected coverage level that ranges from 25% to 90%-the product of these two items yields the covered production history (CPH). Producers must pay an annual administrative fee of $100 for each participating dairy operation, and a premium that rises steadily for higher margin protection levels starting at the $4.50/cwt. margin level. The minimum $4.00/cwt. margin is fully subsidized and has no farmer-paid premium. The premium structure is further divided based on the volume of CPH-lower premiums are charged for the first 4 million pounds (lbs.) of CPH, higher premiums are charged on CPH above 4 million lbs. As an incentive to encourage participation by smaller dairy operations (with CPH under 4 million lbs.), premiums will be reduced by 25% across the board for all margin protection levels except the $8.00/cwt. Level during calendar 2014 and 2015.
The DPDP requires USDA to procure and distribute certain dairy products when the ADPM falls below $4.00/cwt. for two consecutive months. DPDP dairy product distribution is required to target individuals from low-income groups and not be allowed for resale into commercial markets. Purchases and distribution under the DPDP end after three months or if the U.S. price for certain dairy products is significantly above world prices.
Several programs from the 2008 farm bill were extended through FY2018 including the Dairy Forward Pricing Program, the Dairy Indemnity Program, and certain provisions to augment the development of export markets under the National Dairy Promotion and Research Program (i.e., the dairy check off program). In addition, the final bill adopted a provision that requires USDA to adhere to standard rulemaking procedures.
Separately, federal milk marketing orders have permanent statutory authority and continue intact, as does the Livestock Gross Margin for Dairy Cattle program (LGM-D) and the suite of Dairy Import Tariff Rate Quotas (TRQs) that limit access to the U.S. domestic market by lower-priced foreign dairy products. The permanent Dairy Price Support Program contained in the Agricultural Act of 1949 (P.L. 81-439) is suspended but would be reactivated should MPP expire at the end of FY2018 without replacement or extension.
Sep 15 2014
1502506424 / 9781502506429
US Trade Paper
8.5″ x 11″
Black and White
Business & Economics / Industries / Agribusiness