OPINION In advance of the former Margin Insurance Program, officials at Pro-Ag evaluated the program. We tried to warn dairy farmers that the program was not going to come close in solving the dairy-farmer financial situation.
While we never advised dairy farmers to go with the program, nor did we urge them not to go with it. Thousands of dairy farmers listened to Pro-Ag and others, and consequently 50 percent of dairy farmers stayed out of the program. As we predicted the program did turn out to be a near-failure.
Now we are facing the beginning of a new insurance program that is supposedly geared to save the American dairy farmer. I will admit that I have not examined the new insurance program with the same intensity I did with the Margin Insurance Program. But I have talked with some of the authorities that have the full knowledge of how the new program will work.
Most of the information seemed to center around a 5-million-pound-a-year dairy farmer, and with the producer taking $9.50-per-hundredweight protection. U.S. Rep. Collin Peterson, D-7-Minnesota, is chairman of the House Agriculture Committee. I think he wants to save our remaining dairy farmers. He and other elected officials in Congress are claiming a dairy farmer taking that protection should be able to receive about $100,000 more than the cost of his premium. That appears to sound real good to a dairy farmer.
Peterson and others are right regarding their remarks of $100,000. But I learned that any dairy farmer making 5 million pounds of milk per year and taking the $9.50-per-hundredweight protection will, under current economic conditions, receive $27,000 more than the cost of his investment, or for five years, which comes to $135,000. Again those figures are only based on current economic conditions. And those figures will change during the five years, increasing or decreasing.
The catch is that those payments only cover feed costs of our dairy farmers. What about all other costs experienced by dairy farmers? According to the figures from the U.S. Department of Agriculture’s Economic Research Service, the cost of producing milk on an average dairy farm was $21.66 per hundredweight in 2018. According to other officials in the USDA, the average dairy farmer in the United States in 2018 was underpaid nearly $5 per hundredweight less than his or her $21.66 cost, or that same dairy farmer was underpaid by about $250,000.
But wait a minute. He or she will receive about $27,000 in payment each year – or his underpayment will be $223,000. How long can dairy farmers survive with those losses?
With all due respect to members of Congress, it appears to me they have been misled one more time by this insurance program. This is the reason why so many dairy farmers are being forced out of business. If we multiply the $223,000 by five years, that same producer will be short-changed over $1 million using current economic conditions. Is this what our Congress wants to happen to our dairy farmers?
Arden Tewksbury is the manager of the Progressive Agriculture Organization. Call 570-833-5776 for more information.