MILC Counters Lower Dairy Prices

Milk Income Loss Contract shields dairy farmers against fluctuations.

Published on: Feb 2, 2009

With milk prices collapsing following two years of historical highs, an old dairy program reauthorized by the 2008 Farm Bill may aid dairy producers by adding additional income over the coming months.

Dairy producers are being encouraged to sign up for the Milk Income Loss Contract - a program that provides monthly payments to producers when market prices drop below the program's defined trigger price. MILC was first authorized by the dairy title of the 2002 Farm Bill, and after years of extensions has been included in the 2008 dairy title of the Food, Conservation and Energy Act. MILC now includes a feed cost adjuster and increases in both the payment rate and production eligibility among small to medium-sized dairy farms.

"MILC functions similarly to the old grain countercyclical payment programs," says Cameron Thraen, an Ohio State University Extension dairy economist. "The program has an identified target or trigger price and when the market price drops below that trigger price, the difference between the two is calculated and farmers receive 45 percent of that difference."

With milk prices tumbling nearly 35% in just the past few weeks due to decreased domestic and global demand and the outlook for 2009 looking grim, Thraen says that dairy producers should act quickly to sign up for the MILC program.

"There is absolutely no cost to sign up for the program," he says. "Any producer who is not signed up for the program or is not thinking about signing up is missing an excellent opportunity."

Thraen reminds producers that participating in the previous MILC program does not automatically enroll a producer in the current program. New sign-up forms must be completed and submitted.

Thraen outlines the requirements to join MILC and the details of how the program works in a series of documents located on his OSU Extension Web site: aede.osu.edu/programs/OhioDairy/MILC_Center/MILC_Center.htm. The information includes a spreadsheet that allows dairy producers to calculate monthly eligible milk shipments, MILC payments, and total anticipated revenue from the program based on actual or estimated monthly milk and feed prices throughout fiscal year 2009.