Northeast dairy farmers who have been strapped for months by low milk prices say a voluntary insurance program that was supposed to be a safety net isn't helping.
The margin protection program provides financial assistance to enrolled farmers when the gap between the price of milk and national average feed costs falls below the coverage levels picked by individual farmers.
"It's a complete failure," said Les Pike, of Keewaydin Farm in Stowe, Vermont, which has been losing money for months. "If it doesn't pay in a year like this, it's completely useless."
Farmers say the margin protection program is not based on Northeast farmers' feed costs but on the national average feed cost, which is less. The chairman of the National Milk Producers Federation testified in Washington last month that the program needs improvements. Randy Mooney, who is also a Missouri dairy farmer, said the formula for calculating feed costs was changed and no longer reflects the true cost of feeding a herd while the insurance premiums for farmers were not reduced.
"For many farmers, the (program) is simply not enough to protect them in this economic environment," he told the House Subcommittee on Livestock and Foreign Agriculture.
An oversupply of milk in the U.S. and the world has caused milk prices paid to farmers to fall below production costs for months — hovering between $14 and $15 per hundred pounds of milk.
Consumer prices for milk also have dropped but do not follow the farm prices closely.
"Because milk prices are so low ... dairy farmers are producing more milk to keep their cash flow. Obviously that only makes the situation worse," said Doug Dimento, a spokesman for the Agri-Mark, a Northeast dairy cooperative.
U.S. milk exports also have declined in recent years, he said. About 13 percent of the country's milk is exported, down about 2 or 3 percent from recent years.
Farmers in the Northeast have higher expenses for energy, labor and transportation than other areas of the country, so they're feeling particularly hard hit.
Longtime Brookfield, Vermont, farmers Brenda Snow and her husband, who are both in their 60s, decided to sell their cows in June in part due to the prices and because she said they are worn out.
"You're doing a lot of work and you're not making any money at that price. You might call it a good decision to retire," she said.
Legislation has been introduced in the U.S. House by Vermont Rep. Peter Welch, a Democrat, New York Rep. Chris Gibson, a Republican, and Democratic Rep. Joe Courtney of Connecticut that would amend the Farm Bill to require the Secretary of Agriculture to use data from each state to calculate average feed costs and dairy production margins for the insurance program.
But there is a lot resistance to reopening the Farm Bill before it expires, Welch said. The current Farm Bill was passed in 2014 and expires in 2018, his office said.
"As it's written right now, our farmers are not getting relief," Welch said. "In fact they need it. We've got low prices and we're moving into the summer when the demand generally declines a bit so it's rough right now."
Dairy Safety Net Ineffective, Farmers Say