sealPurdue News

September 23, 2002

Milk money: Farm bill increases dairy industry support

WEST LAFAYETTE, Ind. – New farm legislation expands federal support to the men and women who fill the nation's dairy cases.

The 2002 Farm Bill provides dairy producers government payments when milk prices are low and earmarks dollars for bovine disease eradication and environmental improvements at dairy operations, said Mike Schutz, Purdue University Cooperative Extension Service dairy specialist.

Those dairy farms can participate in the Dairy Market Loss Payment (DMLP) program, Schutz said. Introduced in the 2002 Farm Bill, the DMLP is an assistance payment that kicks in when fluid milk prices drop below the announced Boston Class I milk price.

Crop producers have a similar payment within the farm bill, Schutz said.

"The Dairy Market Loss Payment is designed to help producers overcome times when milk prices are low," Schutz said. "The base that's used is the value of $16.94 a hundredweight, at the Boston Class I price. Anytime the milk price falls below that price, eligible dairy producers will receive a payment equal to 45 percent of the difference between the current milk price and the $16.94 Boston Class I price. It's considered a counter-cyclical payment."

Milk prices have been below the Boston Class I price all year. For July alone, eligible dairy farmers would receive a DMLP of $1.38 for every 100 pounds of milk they produce.

"Currently, prices are very low, considering we're in the fall of the year when milk prices are expected to be somewhat higher," Schutz said. "The all-milk price is around $11.20 a hundredweight across the country. That price is approximately $4.50 lower than it was about a year ago at this time."

The farm bill sets a limit on how much milk qualifies for market loss payments, Schutz said.

"Milk production of up to 2.4 million pounds per year will be covered," he said. "That's broken down into a transition period, which runs from Dec. 1, 2001, through Oct. 1, 2002, and then for each government fiscal year of Oct. 1 through Sept. 30 every year through September 2005."

Dairies producing fewer than 2.4 million pounds of milk a year – around 300,000 gallons – stand to benefit more from the DMLP than larger dairies, Schutz said.

"Smaller producers would be able to have payments made throughout the year for any months the milk price falls below $16.94," he said. "Larger producers would only be covered for the first months they are eligible, up to the 2.4 million pounds."

Dairy producers can apply for the DMLP at county offices of the U.S. Department of Agriculture's Farm Service Agency (FSA). While there, they'll need to provide documentation of past milk production and designate a month when they want payments to begin.

"You'll be asked to report production each month through the years you've signed up for the program," Schutz said.

"There are lots of ways to report milk production. You can use the tank recordings that are left at the farm or the check stub your milk handler or milk marketing co-op provides each month. Send it in to the FSA, and they'll make a copy and then return the original to you."

Other dairy-related provisions within the 2002 Farm Bill include:

• Funding for a Johne's disease control program. Johne's, also called paratuberculosis, is a contagious bacterial disease of the intestinal tract. While it occurs in many animals, it is most commonly seen in dairy cattle.

• Additional dollars for dairy producers to upgrade their manure management systems, under the Environmental Quality Incentives Program.

• Rewritten statutory mandatory inventory and price reporting language. "In the past these have affected milk prices when cheese and butter inventories have been misreported," Schutz said. "The new language should ensure a bit more stability in milk prices."

Additional information on the DMLP and other farm bill dairy issues is contained in the Purdue Extension publication "Implications of the 2002 Farm Bill for Dairy Producers," by Schutz and Ralph Booker, Purdue Extension educator, Marshall County.

Milk production in the 20 major dairy states, including Indiana, was 12.2 billion pounds in August, up 4 percent from August 2001, according to the U.S. Department of Agriculture.

Indiana dairies produced 212 million pounds of milk in August, up 2 percent from a year earlier. The state is home to about 2,200 dairy farms, representing approximately 150,000 cows.

Writer: Steve Leer, (765) 494-8415,

Sources: Mike Schutz, (765) 494-9478,

Ralph Booker, (574) 935-8545,

Related Web sites:

University of Wisconsin's Understanding Dairy Markets page:

Purdue News Service: (765) 494-2096;

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