SCHUMER: WITH TURBULENT MILK PRICES, UPSTATE DAIRY FARMERS ARE GETTING SQUEEZED ON ALL SIDES, INCLUDING LARGE, LUMP-SUM MILK INSURANCE PAYMENTS – SCHUMER URGES USDA TO IMPLEMENT NEW PROGRAM TO EASE THE BURDEN OF CASH-STRAPPED DAIRY FARMS
Upstate NY Dairy Farmers Are Saddled With Lump-Sum Insurance Payments Through Turbulent Milk Prices –Schumer Pushes USDA To Create New Payment Program Where Coops and Farmers Could Work Together to Spread Out Milk Insurance Payments Through Deduction System
NY Dairy Farmers & Upstate NY Co-Ops, Which Buy & Market Milk, Have Expressed Need to Spread Out Payments Through New Kind of Payment Program; Co-Ops or Private Companies Would Pay Costs Up Front For Farmers & Farmers Then Would Have Payments Deducted From Monthly “Milk Checks”
Schumer: New, Balanced Insurance Payment Program Can Help Alleviate Pressure on Cash-Strapped Farmers And Increase Participation In Risk Management Program
On a conference call with reporters, U.S. Senator Charles E. Schumer today launched his push to have the U.S. Department of Agriculture (USDA) create a new dairy payment option for the margin protection program (MPP), a dairy risk management program, that would give more financial flexibility to New York State dairy farmers, who face turbulent milk prices. Creating more flexibility for premium payments would attract more farmers to participate in the dairy risk management program, which helps farmers through tough times when profit margins get too low. Currently, dairy farmers are required to pay the total cost of their milk insurance premiums early in the calendar year, which is increasingly difficult now due to falling prices. Schumer said the inherent volatility of milk prices, dairy farmers should have greater flexibility to meet their insurance costs. Therefore, Schumer proposed to USDA a new dairy insurance payment option whereby the dairy co-ops or a private company, which buys and markets milk on behalf of individual producers, could front the insurance premiums for individual farms and then could be paid back by deducting premium costs from monthly “milk checks” to farmers.
Currently, the dairy MPP system requires farmers to make a 25 percent payment on the annual insurance bill in February and pay the remaining balance in June. Schumer explained that his proposed payment option, by allowing co-ops or private companies to spread out farmers insurance payments throughout the year, will improve cash flow for farmers and alleviate some of the financial pressures on dairy farmers during periods when prices are low. In addition, allowing greater flexibility to farmers will help attract more farmers into the new margin protection program, which serves as an important safety net during hard times for dairy farmers.
“The falling cost of milk means more and more New York farmers are struggling to make ends meet. Their bottom line is complicated by the fact that they are currently required to pay their insurance premiums in large lump sums twice a year. That’s why I’m proposing a new insurance program that enables farmers to spread out their payments over the course of the year by allowing the co-ops that market and sell their milk to make the payments for them,” said Schumer. “This would give our Upstate dairy farmers greater flexibility and put a little extra money in their pockets each month during hard times.”
Schumer said that keeping Upstate New York’s dairy farms on firm financial footing is imperative for the industry as well as the Upstate New York economy as a whole. However, right now, some farmers are struggling to make ends meet with the current period of declining milk prices. Schumer said prices that were once as high as $24 per hundredweight. in 2014 have declined as low as $15 per hundredweight. over the past few months. 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. One of the necessary costs they must contend with is premium payments for the margin protection program, which Schumer says is a critical tool for farmers to endure hard times. It is for that reason that Schumer believes USDA should offer more flexibility in the program to make it easier for farmers to participate.
Schumer explained that the new margin protection program (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.
That is why Schumer is calling on the USDA to help institute a new payment option under MPP, whereby the dairy co-ops or businesses who buy and market milk on behalf of individual producers – could pay up front the insurance premiums for individual farms. These organizations would then be paid back by the individual farmers on a monthly basis via deductions to their payments for their milk. Schumer said this is something desired by both farmers and co-ops Upstate, as it would improve a dairy farmer’s on-hand cash flow throughout the year and make participating in the program easier. Schumer said these co-ops typically have more resources than individual farmers and can offer them the flexibility to pay throughout the year, making it easier for them to survive periods when milk prices are low. Co-ops or businesses would simply “deduct” a certain percentage from the money these individual farms owe them form their check for their milk until the premium is fully paid off through the course of the year. Schumer said this new kind of system would mean farmers could more effectively spread out their payments.
Schumer said co-ops throughout Upstate New York and the country are looking to help individual farmers through these kinds of programs, and already do so for other costs they incur on behalf of farmers, like transporting their milk to market. What’s more, Schumer said, is the USDA has the power to make this critical change to its program without any new legislation. The establishment of the milk check deduction system could also encourage more individual dairy farmers to participate in the MPP program. Schumer said that ensuring high participation from individual farmers in MPP will better guarantee the farmers success.
During 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 be affected:
- In the Capital Region, there are 602 dairy farms.
- In Western New York, there are 539 dairy farms.
- In Central New York, there are 1,019 dairy farms.
- In the Rochester-Finger Lakes, there are 1,022 dairy farms.
- In the Southern Tier, there are 1,126 dairy farms.
- In the Hudson Valley, there are 130 dairy farms.
- In the North Country, there are 983 dairy farms.
Schumer said that, currently, over 50 percent of dairy farmers have elected some level of coverage under MPP for their product. This means a significant percentage of the above farms in Upstate New York could benefit from enrolling in future years.
A copy of Senator Schumer’s 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