If Congress fails to pass a new, five-year farm bill or approve an extension of the existing legislation by the end of 2023, dairy farmers, including those in the nation’s No. 1 dairy state of California, would face what is known as the “dairy cliff.”
Matthew Viohl, California Farm Bureau director of federal policy, said this relates to the expiration of the Dairy Margin Coverage Program, a risk management tool in the federal farm bill that offers monthly price support payments to dairy farmers. If no action is taken before 2024, he said, that means less support for dairy producers, an increase in milk price and supply-chain disruptions.
“If nothing is passed by the end of December, many farm bill programs revert to the 1930s- and 1940s-era pricing structure, and dairy is one of those,” Viohl said. “It would be disastrous for the dairy industry because monthly support payments would be halted, and the impacts would be felt immediately, so this is a big concern.”
Allowing the farm bill to lapse would halt monthly DMC Program payments, which kick in when the national average income-over-feed cost margin falls below a farmer-selected coverage level. Dairy is the first crop affected in the 2024 crop year because producers are milking cows daily as opposed to a crop that is in the ground for a longer period, Viohl said.
“Dairies are the first ones to really feel the pinch if the farm bill lapses in December,” Viohl said.
Chris Galen, senior vice president of member services and governance at the National Milk Producers Federation, said the dairy sector could face a situation in which the U.S. Department of Agriculture is required to support the price of certain commodities at parity levels using a formula that dates back many decades.
For milk, this would mean a USDA support price of about $50 per hundredweight, which Galen said is “unworkable economically and politically.”
Madeline Desrochers, assistant manager of Yuba County-based Tollcrest Dairy in Wheatland, said the 2,000-cow dairy receives monthly payments through the DMC Program.
“The farm bill is important. We are definitely concerned about DMC ourselves and in the dairy industry,” Desrochers said. “Everything is definitely expensive like feed and labor, and with inflation costs and interest at 10%, it makes it really difficult.”
She added, “Every little bit helps, so we would surely miss it (the DMC payment), but small dairy farms would miss it more. If you are milking only 150 cows, then it’s a bigger deal.”
Anja Raudabaugh, CEO of Western United Dairies, said the DMC Program is extremely beneficial to help producers hedge against one of the worst dairy pricing years she has seen in years.
“When that (income-over-feed cost) margin gets to be at what we call catastrophic coverage, the dairy farmer gets paid the difference between that $4 a hundredweight and whatever the feed price is,” Raudabaugh said. “Everybody essentially got paid out this year, especially in June, July and August because the milk price was so bad and the price of feed was so expensive.”
Signing up for the DMC Program at the $9.50 per cwt. level, she said, proved to be a good investment for large dairies that could afford this level of coverage. Small dairies do not have the funding for DMC coverage, especially organic dairies whose feed costs are significantly higher, she said.
“If you are getting a check from DMC, it helps pay a feed bill, it helps pay a labor bill, it helps pay a broken tractor bill…it helps,” Raudabaugh said. “But times are really bad, and it is a sign of industry health and a trigger that something bigger is happening.”
She said she does not have much confidence that Congress will pass a new farm bill by the end of this year but believes a continuing resolution to extend the 2018 Farm Bill may be more achievable.
While there is discussion in Washington, D.C., about how to fund the government ahead of a looming federal shutdown in mid-November, 61 House representatives reaffirmed their commitment to passing a farm bill in an Oct. 26 letter to Speaker of the House Mike Johnson, R-La.
The letter called for a strong farm safety net and crop insurance program. “We urge you and the conference at large to be united in ensuring swift passage of a strong farm bill,” it read.
California Farm Bureau urged lawmakers to craft the five-year farm bill and pass the legislation this year with provisions to expand crop insurance to benefit more commodities, such as those grown in California.
“Even if we passed a new farm bill a month ago, these programs take years to implement,” Viohl said. “If we tack on a two-year extension now, we may not see credible improvements for four or five years on crop insurance, so that timeline is very unfortunate. We are trying to avoid that.”
Passing a farm bill in 2024 is further challenged by the presidential election. But if lawmakers extend the farm bill by one year, Viohl said they could pass a farm bill during the “lame-duck” session after the election and before the next Congress.
Sen. Debbie Stabenow, D-Mich., chairwoman of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, spoke on the Senate floor last month about the importance of passing a bipartisan, five-year farm bill.
“The unifying principle behind the farm bill is that it is a safety net for farmers and families,” Stabenow said. “When crops fail or when disaster strikes, the farm safety net steps in to provide stability and security. There’s a lot of people counting on us to get this done.”
(Christine Souza is an assistant editor of Ag Alert. She may be contacted at [email protected].)