Critics say the dairy subsidy created by the 2014 farm law, called the Margin Protection Plan and based on the difference between milk prices and feed costs, is inadequate in the face of the steep decline in milk prices since 2014. An alternative approach is being developed, says Dairy Herd Management magazine – a revenue insurance policy.
Revenue policies are the most popular type of crop insurance coverage. As the name suggests, they shelter producers from the effects of low prices or production shortfalls. Dairy Herd Management says the dairy insurance program is being developed by the American Farm Bureau Federation and its insurance company. Plans call for submitting the proposal, called Dairy-Revenue Protection, to USDA’s Risk Management Agency for review this spring.
Contracts would cover a three-month period and would be available up to 15 months in the future, with coverage up to 90 percent of usual revenue. If the government pays the same subsidy in premiums as it does for crop insurance – 62 cents of each dollar – the average premium on a policy covering revenue three months in the future would be 9 cents per 100 pounds of milk, according to one estimate.