What’s 7.3% of less than half a penny? It’s the amount the federal government will retain of dairy margin insurance indemnities from January and February, thanks to obscure budget sequestration rules.
On April 13, USDA announced an indemnity payment of 0.446 cents/cwt for dairy farms that had signed up for $8 dairy margin insurance. For a dairy farm that has 4 million lb. of annual milk production, the 7.3% amounts to $2.17 on a total payment of $29.73. So the farm would net just $27.56, says Andrew Novakovic, a Cornell University dairy economist.
“The difference [$2.17] is essentially retained by the U.S. Treasury and represents a budget savings,” he says. But he also points out the annual premium and administrative fee for this level of coverage was $19,573.
The sequestration rules are the result of Congressional gridlock, dating back to 2011. For more detail, click here.