WASHINGTON--Changes in the 2018 farm bill and COVID-19 have cost Idaho and the nation's dairy farmers millions of dollars.
The 2018 farm bill modified milk pricing rules to improve risk management for beverage milk processors, dairy coops, and farmers. While improving the risk management was achieved, the American Farm Bureau’s Economist John Newton says that rule change will cost dairy farmers, millions.
"It got rid of what was the higher-of, in the pricing formula, and replaced it with a simple average of the Class III and IV milk prices. And because of COVID-19 price volatility that milk price is a lot lower than what it would have been otherwise, to the effect of around $400 million in lost revenue for dairy farmers," said Newton.
The new milk pricing rules went into effect in May 2019 according to Newton.
"It was something that was put into the 2018 farm bill really designed to provide new risk management tools for the beverage milk industry to allow them to use futures contracts for milk to hedge their beverage milk price risks. But unfortunately, because of COVID-19 price volatility, it revealed some of the unintended consequences on farmer income," said Newton.
The change to the milk pricing rules did not proceed through a formal rulemaking process. Newton says farmers are likely to consider potential improvements in the Federal Milk Marketing Order.