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Rutland Herald: Dairy insurance program enrollment ends Friday

December 2, 2014
In The News

Rutland Herald

Dairy farmers have until Friday to enroll in an insurance program that will protect them against any rising costs of fuel and feed, and milk prices that are forecast to drop in 2015.

The Dairy Margin Protection Program, part of the 2014 U.S. Farm Bill signed into law in February, offers dairy farmers insurance to protect against the narrowing of their profit margins.

“If you think about crop insurance that farmers buy, it’s a lot like that,” said Bob Paquin, director of the Vermont Office of the USDA Farm Service.

The insurance program helps to shield dairy producers from market fluctuations that affect their profit margins and, ultimately, their bottom lines, such as the cost of feed and fuel, and the price they get for their product.

While feed prices are holding steady and fuel prices are actually dropping, Paquin said there’s no way to know if those expenses will remain steady. However, experts are expecting the money farmers receive for their product to fall.

At approximately $24 for every 100 pounds — milk is measured by weight, not volume — the price dairy farmers are getting right now is “strong,” Paquin said. However, in 2015, milk prices are projected to fall to $18 for every 100 pounds, a significant price swing that could have a significant impact on profit margins, Paquin said.

For an administrative fee of $100, a dairy farmer can purchase insurance that protects them against a change in the profit margin of as much as $4. However, farmers are free to purchase more coverage if they wish, up to $8.

Rates are set based upon the farm’s production history from 2011-2013. For the average Vermont dairy farm, which produces 4 million pounds of milk from 140 cows, the cost to buy $6.50 in margin protection costs 8 cents for every 100 pounds.

According to Paquin, as of Monday 191 of the state’s 874 dairy farms had purchased insurance through the program, with 94 farmers signing up for the minimum plan and 97 opting to purchase additional coverage.

An additional 100 farmers have submitted their production histories, and Paquin said he expects there will be a rush of farmers signing up for coverage before Friday’s deadline.

“We know there are some of our producers who won’t sign up. They want to see how it goes,” Paquin said. “If the decision is to not participate, that’s fine. We just want people to be able to make the decision.”

The next enrollment period will begin in July.

Paquin urged farmers to contact their county Farm Service Agency office or to visit www.fsa.usda.gov, where users can find a web-based tool to calculate coverage costs. 

Paquin noted the dramatic swing in the amount of money farmers get for their product, which fell to $12 per hundred pounds in 2009 and is projected to fall 25 percent from its current level in 2015.

“One of the farmers told us, ‘This is like buying fire insurance when you can smell smoke,’” Paquin said.

U.S. Rep. Peter Welch (D-Vt.) discussed the importance of the program during a stop Monday at the USDA Office in Williston.

“I strongly encourage farmers to take a good, hard look at this important program and sign up before Friday’s deadline,” Welch said. “While 2014 has been a good year, history tells us that milk prices can drop quickly and dramatically. This insurance program will give farmers peace of mind by insulating them from the punishing roller coaster ride of milk prices.”