Declining milk prices have prompted a proposal could help St. Lawrence County farmers spread out costs associated with the newly implemented Margin Protection Program.

Some St. Lawrence County farmers are struggling to make ends meet as milk prices have dropped by more than 50 percent recently. Prices that were as high as $24 per hundredweight in 2014 have declined as low as $15 per hundredweight over the past few months.

Meanwhile, farmers are dealing with increased operational costs as they prepare to plant crops. Unlike most businesses, farmers can’t raise prices to meet production costs, because milk prices are set using a formula established by the federal government to ensure milk is affordable to consumers regardless of production costs.

“The falling cost of milk means more and more New York farmers are struggling to make ends meet. Their bottom line is complicated by the fact that they are currently required to pay their insurance premiums in large lump sums twice a year. That’s why I’m proposing a new insurance program that enables farmers to spread out their payments over the course of the year by allowing the co-ops that market and sell their milk to make the payments for them,” said Schumer. “This would give our Upstate dairy farmers greater flexibility and put a little extra money in their pockets each month during hard times.”

Schumer said that while milk prices are typically less predictable than other crops, dairy farmers are still experiencing an extended downturn in prices.

For this reason, Schumer said many dairy farmers have expressed concern with the fact that they must contend with so many fixed costs – despite the potential for increased feed costs and drops in the price of milk, which directly impact farmers profit margins.

One of the necessary costs they must contend with is premium payments for the margin protection program, which Schumer says is a critical tool for farmers to endure hard times. It is for that reason that Schumer believes USDA should offer more flexibility in the program to make it easier for farmers to participate.

Sen. Charles Schumer is pushing to have the U.S. Department of Agriculture (USDA) create a new payment option for the margin protection program (MPP), a dairy risk management program that would give more financial flexibility to dairy farmers, who face turbulent milk prices.

Currently, the dairy MPP system requires farmers to make a 25 percent payment on the annual insurance bill in February and pay the remaining balance in June. However milk prices often rise and fall meaning some months revenues will be down. Compounding the problem are seasonal operational costs such as fuel, fertilizer and seeds used in spring work.

Schumer said that his proposed payment option would allow co-ops or private companies to spread out farmers insurance payments throughout the year. He says this will improve cash flow for farmers and alleviate some of the financial pressures on dairy farmers during periods when prices are low, but production costs are high.

Creating more flexibility for premium payments would attract more farmers to participate in the dairy risk management program, according to Schumer. This would in turn help farmers through tough times when profit margins get too low.

Currently, dairy farmers are required to pay the total cost of their milk insurance premiums early in the calendar year, which is increasingly difficult now due to falling prices. Schumer said the inherent volatility of milk prices, dairy farmers should have greater flexibility to meet their insurance costs.

Therefore, Schumer proposed to USDA a new dairy insurance payment option whereby the dairy co-ops or a private company, which buys and markets milk on behalf of individual producers, could front the insurance premiums for individual farms and then could be paid back by deducting premium costs from monthly “milk checks” to farmers.

Schumer explained that the new margin protection program (MPP) was passed as a part of the 2014 Farm Bill and replaced the USDA’s former Milk Income Loss Contract (MILC) Program. This new system allows farmers to decide how much of their milk they will insure, and at what margin. The MPP offers protection to dairy producers when the difference between the milk prices and the feed costs falls below a certain dollar amount, which the producers select.