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Schumer Urged USDA To Work With NY Dairy Farmers & Upstate Co-Ops And Private Companies, Which Buy & Market Milk, To Create New Premium Payment Option That Spreads Out Premium Payments Throughout The Year; Co-Ops or Private Companies Can Pay Costs Up Front For Farmers, Who Then Could Have Payments Deducted From Monthly “Milk Checks”

 Under Old Program, Upstate NY Dairy Farmers Were Forced To Make Two Lump Sum Payments, But Turbulent Milk Prices Have Restricted Cash On Hand To Purchase Coverage through the Margin Protection Program

Schumer: New Premium Payment Option Can Help Alleviate Pressure on Cash-Strapped Farmers 

U.S. Senator Charles E. Schumer today announced, following his push, the U.S. Department of Agriculture (USDA) will establish a new dairy payment option for the Margin Protection Program (MPP), a dairy risk management program, that will give more financial flexibility to New York State dairy farmers when it comes to making premium payments while dealing with the repercussions of turbulent milk prices.

“This decision by the USDA is great news for New York dairy farmers who are struggling with volatile milk prices and could use these flexible and spread-out insurance payments to preserve more cash on hand,” said Schumer. “Now, we have made it easier for our cash-strapped dairy farmers across Upstate New York during hard times.”

Last year, dairy farmers were required to pay the full cost of their milk premiums early in two lump sum payments. However, turbulent milk prices have left dairy farmers with smaller profit margins and in need of greater flexibility to meet their insurance costs. This has made it more difficult for dairy farmers to cover the lump sum payment necessary to purchase this critical insurance. The new option, first pushed by Schumer, will allow dairy co-ops and private companies – which buy and market milk on behalf of individual farmers – to front the insurance premiums for farmers who elect this option, would then be paid back by deducting premium costs from the monthly “milk checks” these farmers receive. Schumer said the USDA issued guidance allowing the new payment option for MPP to be to be available for the 2016 MPP sign ups. In addition, USDA has announced that the deadline to enroll for the dairy MPP coverage in 2016 has been extended until Nov. 20, 2015.    

Schumer explained that, last year under the MPP system, farmers were required to pay 25 percent of their annual premium in February and pay the remaining balance in June. The new option will allow co-ops or private companies to cover the costs for farmers up front, so farmers can spread out their premium payments through deductions in the payments they receive for their milk. Schumer said this will give New York State dairy farmers another option for greater financial flexibility and allow them to have more cash on hand and make it easier for them to participate in this important program. This is especially important given the fluctuations in milk prices. Schumer said the volatile nature of milk prices has restricted dairy made it harder for farmers with restricted the cash on hand necessary to pay their premiums in lump sum. Therefore, in April, Schumer proposed a new option, which the USDA approved that will allow dairy co-ops and private companies to have the ability to cover the MPP premium costs on behalf of individual dairy farmers. They will then be paid back by deducting premium costs from the monthly “milk checks” farmers will receive over the course of the year.

Schumer said volatile milk prices have taken a toll on Upstate New York’s dairy farms as well as the Upstate New York agriculture industry as a whole. Despite milk reaching $24 per hundredweight at one point, in 2014 it declined to as low as $15 per hundredweight. Schumer said that while milk prices are typically less predictable than other crops, dairy farmers are still experiencing an extended downturn in prices. For this reason, Schumer said many dairy farmers have expressed concern with the fact that they must contend with so many fixed costs – despite the potential for increased feed costs and drops in the price of milk, which directly impact farmers’ profit margins. Schumer said having this MPP coverage will be a critical tool for farmers to endure hard times and one of the necessary costs they must contend with was lump sum premium payments for the margin protection program. It is for that reason that Schumer believed USDA should offer more flexibility in the program to make it easier for farmers to participate.

On a conference call with reporters in April, Schumer explained that with more than 5,400 Upstate dairy farms the new MPP system is a win for farmers, as it gives farmers a needed safety net for tough times. On the call, Schumer said there are a total of 5,421 Upstate dairy farms according to the USDA’s National Agricultural Statistics Service 2012 Census of Agriculture, which could seek to benefit from this new payment option.

Schumer explained that the new MPP was passed as a part of the 2014 Farm Bill and replaced the USDA’s former Milk Income Loss Contract (MILC) Program. This new system allows farmers to decide how much of their milk they will insure, and at what margin. The MPP offers protection to dairy producers when the difference between the milk prices and the feed costs falls below a certain dollar amount, which the producers select.

A copy of Senator Schumer’s initial letter to the USDA appears below:

Dear Secretary Vilsack:

I write to urge the U.S. Department of Agriculture (USDA) to release guidance to increase the flexibility of the Margin Protection Program (MPP) premium payment process to allow for cooperatives and private companies to establish a deduction system that will allow for farmers to pay their premiums through monthly “milk check” deductions, rather than in one or two large payments directly to the agency. I commend USDA for its implementation of the new margin protection program authorized in the 2014 farm bill, however allowing greater flexibility of the premium payment process will help increase future participation in the program.

As you know, dairy prices historically have been volatile, which can place great financial pressure on dairy farms. This is why I supported the creation of the Margin Protection Program in the 2014 farm bill to help farmers endure tough times when profit margins shrink to financially unsustainable levels. Over the past year milk prices have fluctuated from a high of almost twenty five dollars per hundredweight down to just fourteen dollars. It is critical that USDA increases the premium payment flexibility of the margin protection program to attract greater participation by giving cooperatives and private companies who sign long-term purchasing contracts with dairy farmers the ability to pay farmers premiums upfront and recoup the cost through monthly deductions from payments to the farmer for their milk.      

This type of deduction system is common in the dairy industry. However, it is important that any premium payment agreement with USDA that allows for the deduction of premium payments, does not shift the responsibility of the producer to pay their premiums on to the cooperative or private company in the case that they cease operation.

Again, I thank you for your work to implement the new margin protection program for our dairy farmers, but encourage you to increase the premium payment flexibility in time for registration for 2016. Thank you for your attention to this important request.


Charles E. Schumer

United States Senator