President's Proposed Budget Would Impact Dairy Programs

MILC program extended through August 2007.

Published on: Feb 23, 2006

The Bush Administration unveiled its proposed budget for Fiscal Year 2007 including a reduction in the value of the price support program, cutting MILC payments by 5%, and taxing farmers 3 cents per cwt. on all of their production.

The changes need approval from Congress, which is far from a certainty. They would take effect for the fiscal year that begins Oct. 1.

The dairy cuts are part of an agriculture budget aimed at reducing spending on commodity programs by $1 billion.

MILC Payment Rate

Year

Class I Base

Payment Rate

October '05

14.27

0.000

November

14.56

0.000

December

13.57

0.0408

January '06

13.38

0.1054

February

13.38

0.1054

March

12.40

0.4386

April

11.82

0.6363

May

11.71

0.6720

June

11.83

0.6316

July

11.76

0.6577

August

11.98

0.5806

September

12.31

0.4689

In related news, the MILC program was extended through August 2007 upon approval by the President recently. If the Class I base price drops below $13.69, farmers are eligible for a USDA payment equal to 34%of the shortfall. This percentage is down from 45% in previous fiscal years. The extended payments will be retroactive to October 1, 2005, and are capped at 2.4 million lbs. of milk production per fiscal year.

Farmers will likely need to contact the Farm Service Agency to renew their participation in the program. FSA will issue its directions for this new signup, and is expected to be relatively flexible as to the farmers' choice of a start date for payment.

*Months in italics are projections.
Based on futures as of February 10, 2006.