For the first time in almost two years, Idaho dairymen are eligible for a
federal subsidy that compensates them when milk prices fall substantially below the costs of production.
The U.S. Department of Agriculture announced this week it has reinstated payments to dairymen under the Milk Income Loss Contract (MILC) program. It’s
the first time the USDA has approved such payments since April 2010.
Farm Service Agency Administrator Bruce Nelson said producers are eligible for almost $0.39 per hundredweight (cwt) of milk. “Dairy producers are affected by the market price for milk and the price of feed to sustain their herds,” said Nelson, in a press release this week.
“MILC payments are triggered when the Boston Class I milk price falls below $16.94 per hundredweight, after adjustment for the cost of dairy feed rations. MILC payments are calculated each month using the latest milk price and feed cost” – USDA
executive director of the Idaho Dairymen’s Association says all Idaho dairies will qualify for the payments. Bob Naerebout says the current price of milk an Idaho producer gets is about $15.72 cwt. Meanwhile, Naerebout says the cost of producing that milk is between $17.50-$18.25 cwt. The gap is so wide because feed prices are high, and the demand for milk has been met.
Naerebout says MILC payments do some good for the industry, but are inadequate for Idaho dairy producers. “It sends poor market signals,” says Naerebout. “It goes into place when the price [of milk] drops. The price drops when the market says we have enough milk.”
Naerebout says the reinstatement of MILC payments shows just how soft the market is, and he’d rather the industry respond to that than rely on subsidies. “As an industry, we have to do a better job of controlling production or increasing demand.”
MILC payments are part of the 2008 Farm Bill, which is in effect until Sept. 30, 2012. Naerebout hopes the new farm bill won’t include the MILC program.