Farm Bill Could Help Farmers Weather Low Milk, Other Commodity Prices

Dec 18, 2018

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By Alayna DeMartini et. al

Dairy farmers have a stronger safety net against low milk prices and high feed costs under the new federal farm bill, and more federal dollars will be spent to spur international trade of American agricultural products.

Both changes could help farmers at a time when revenues from selling milk, corn and soybeans have dipped and markets have shrunk.  

Under the new farm bill, dairy farmers will pay lower premiums for a federal program that provides them payments when the margin between milk prices and feed costs dips below a certain level set by the government. The top level of coverage was raised from $8 to $9.50 per hundred pounds of milk, which will increase payments to dairy farmers.

“This is not a trivial change,” said Carl Zulauf, an agricultural economist and professor emeritus with the College of Food, Agricultural, and Environmental Sciences (CFAES) at The Ohio State University.

“It could mean a lot to dairy farmers.”

Ohio’s dairy farmers have recently been leaving the business at a higher than usual rate as a result of a drop in the price they’ve gotten for their milk for several years. Many of Ohio's 2,130 dairy farmers have struggled with reduced revenue because the supply of dairy products has outstripped the demand.

The new federal farm bill that’s awaiting President Donald Trump’s signature is expected to cost $867 billion over the next decade. It is a massive piece of legislation that funds a host of programs from crop insurance to food assistance. The House of Representatives and the Senate each passed separate versions of the bill in June. Last week, both legislative bodies passed a bill with overwhelming majorities.

“Given the large voting margins, I think there was something in this bill that appealed to everybody, whether you’re living in a rural area or an urban area,” said Ben Brown, manager of the farm management program in CFAES.

Missing from the final bill is a controversial provision to increase work requirements for those receiving foods stamps, also known as Supplemental Nutrition Assistance Program (SNAP).

The farm bill’s allocation of additional money to open up new foreign markets for agricultural products amounts to an additional $235 million over the next five years. This comes at a time when the U.S. share of world markets for many of its agricultural exports is continuing to decline, as it has for decades, Zulauf said.

Soybeans are Ohio’s top agricultural export, but sizeable international tariffs imposed this year on U.S. soybeans as well as on corn and other commodities have driven down the international demand for those crops.

“Farmers want someone to help market their products, which leads to higher demand,” Brown said.

The debate has been over whether the government should partner with farm organizations to help pay for marketing agricultural goods, he said.

Since March, when the Trump Administration announced a 25 percent tariff on foreign steel and 10 percent on foreign aluminum bought in the United States, countries including China, the world’s top soybean consumer, have countered with tariffs on U.S. products, including soybeans, corn, pork and other agricultural products.

Even before the recent tariff war, the United States had been claiming a smaller share in the world export market of many agricultural goods, Zulauf said.

“This is Congress’s reaction to that,” he said.

Other changes in the new farm bill include:

  • Farmers who participate in the Conservation Reserve Program, by agreeing not to plant crops on a portion of their land, could receive less compensation per acre compared to what they received under the previous farm bill. Even so, farmers will have the option of enrolling more acres in that program.
  • Starting with the crop harvested in 2021, farmers, including corn and soybean farmers, will be able to choose annually between one of two commodity subsidy programs: Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC). Previously, farmers could choose only once and had to stick with that choice through the end of whatever farm bill was in place, typically a five-year period. Which program is more profitable for a farmer can change from year to year.
  • More relatives associated with a farm, specifically first cousins, nieces and nephews, could now be eligible to receive federal payments made to farms when commodity prices or a farm’s revenues from the sale of those commodities go below a certain level. The relatives have to meet certain criteria to qualify for the payments.
     

Source: osu.edu