09-27-2013 05:57 PM
As means to end the stalemate between supporters of the House and Senate dairy titles we propose serious consideration on a new dairy safety-net program. This program will: (i) work for small and large-scale dairy farm managers alike; (ii) be fiscally responsible, providing more support than the current MILC yet costing significantly less than the currently debated programs; and (iii) does not mute market supply and demand signals. This new policy alternative which we title MILC-Insurance would accomplish all of these goals by increasing eligibility of MILC to 4 million pounds per fiscal/calendar year and by allowing farms an option to choose annually between MILC and a stand-alone margin insurance program as their elected safety net.
The MILC-Insurance program saves money relative to the stand-alone margin insurance program by capping insurance at $6.00-$6.50 per cwt. With the savings the revenue can be redirected to an expansion of the MILC program; effectively offering the best of both programs (counter-cyclical revenue support or catastrophic margin insurance). Farms would no longer have an incentive to opt-out of the margin insurance and would instead opt for the no-cost MILC program when anticipated margins are favorable. This would allow all farms, regardless of size or management style, to participate in a government sponsored safety net program. Such a program, which offers continuous support, may prevent ad-hoc disaster payments in the future."