Penn State Says New Farm Bill Aids Commonwealth’s Dairy Farmers
UNIVERSITY PARK (Centre
Co.) A dairy economist in
Penn State’s College of Agricul
tural Sciences says he expects the
newly signed federal farm bill to
be “generous” to Pennsylvania’s
small dairy farmers.
The new Farm Security and
Rural Investment Act of 2002 in
cludes a new dairy program
called the “National Dairy Mar
ket Loss” program. According to
Ken Bailey, associate professor of
dairy markets and policy, the
new program offers help for
small dairy farmers who have to
cope with volatile milk prices by
providing direct federal pay
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ments whenever the fluid price of
milk in Boston falls below $16.94
per hundred pounds (CWT).
Bailey says the program will
cover about 88 percent of the
milk produced in Pennsylvania.
“Pennsylvania is unique in that
we have about 10,000 dairy farms
in the state,” he says. “Most
Pennsylvania farms have fewer
than 100 cows, and that’s just the
kind of farm operations that
Congress intended to support
with this program. Unlike many
western states, we can expect the
bulk of our Pennsylvania dairy
producers to receive counter-cy
clical payments on all of their an-
Keep up the good work!
nual milk sales.”
The National Dairy Market
Loss program works by making a
direct payment to farmers in any
month when the Class I price of
milk in Boston falls below $16.94.
The payment rate is equal to 45
percent of the difference between
$16.94 and the Boston Class I
price.
Bailey estimates that the pay
ment rate under the counter-cy
clical program will average 97
cents per CWT for the period
from December 2001 to Septem
ber 2002. “The dairy markets
have been weak in recent weeks
due to sluggish demand and
growth in the milk supply;” says
Bailey. “That will result in fairly
large payment rates under this
new program.” His analysis indi
cates that the Boston Class I
price was above $16.94 just 28
percent of the time during the
60-month period from January
1997 to December 2001.
“The program is retroactive
back to December 2001,” Bailey
says. “Thus, most Pennsylvania
dairy producers can expect to re
ceive a fairly substantial check
from USDA some time this sum
mer or early fall. This check,
which is for the transition period
from December 2001 until they
get the pro
gram run
ning, will be a
one-time pay
ment. There
after, pay
ments will be
computed
monthly and
will be re
ceived by
dairy produc
ers no later
than 60 days
from the pre
vious month.”
Payments
are limited to
the first 2.4
million
pounds of
milk from a
single “dairy
operation” in
a given feder
al fiscal year
(which ends
Sept. 30).
That is equiv
alent to the
amount of
milk from a
133-cow dairy
operation
producing
18,000
pounds of
milk per cow.
The
amount of
money a sin
gle dairy op
eration can
expect for the
first fiscal
year will de
pend on the
level of milk
prices be
tween now
FARMERS
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and September, and on the
amount of milk each farm pro
duces and is eligible for under the
program. Bailey estimated that a
farm with SO cows producing an
average of 15,000 pounds of milk
per cow per year should receive
$6,000. A farm with 80 cows and
15,000 pounds of milk produc
tion per cow will receive $9,700.
The program payments for the
first fiscal year will not exceed
$23,300 for a farm with 150 cows
each producing 20,000 pounds of
milk per year. These numbers as
sume that USD A will allow the
full 2.4 million pounds of milk to
qualify for program payments
over the 10-month period from
December 2001 to September
2002.
Pennsylvania dairy farmers
will receive instructions from
USDA in the next month or so to
sign up for the program at their
local Farm Service Agency office.
They also will receive the regula
tions that spell out exactly how
much milk will qualify for the
program. The sign-up period
should begin no earlier than July
13, 2002. The counter-cyclical
payment program is expected to
end Sept. 30, 2005. USDA is still
writing the regulations that will
determine the definition of a
“dairy operation.”
“The question is, how will
USDA interpret the 2.4 million
pound limit for each fiscal year,”
Bailey says. “Will a Pennsylvania
dairy farm with a husband, wife
and 266 cows qualify for 2.4 mil
lion pounds of milk per farm
partner for a total of 4.8 million
pounds? Or, will the entire opera
tion qualify for no more than 2.4
million pounds?”
The National Dairy Market
Loss program is part of an overall
farm bill that includes an exten
sion of the dairy price support
program and the Dairy Export
Incentive Program (DEIP), a
Johne’s disease control program,
and increased funding for dairy
and other livestock producers
under the Environmental Quality
Incentives Program (EQIP).
Bailey warns that Pennsylva
nia dairy farmers should consider
this program as temporary. “We
should take these payments and
focus on making our farms more
competitive over the next three
years,” he says. “That way, if the
program ends, we’ll be better po
sitioned for the future.”
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CO-OP