President George W. Bush submitted a budget to Congress Tuesday which includes a plan to extend a federal program to help dairy farmers, but the program may see a financial cutback.
The Milk Income Loss Contract program, or MILC, compensates milk producers when domestic milk prices fall below a certain price, or target level. Under the provisions of the 2002 Farm Bill, MILC is set to expire in September of this year if the extension is not approved by Congress.
“This is an encouraging step,” U.S. Senator Herb Kohl, D-Wis, said in a statement. “[I] am pleased the President has joined me and our bipartisan and multi-regional coalition to support an extension of the program.”
The program, which Kohl helped to pioneer, will receive a two-year extension if the budget is approved, but participating farmers may see payments reduced by 5 percent.
When the price of milk falls below the target price, the government pays farmers 45 percent of the difference between the target price and the actual price paid for the milk. However, when the price of milk is above the target level, farmers receive no payments.
The amount consumers pay for dairy products is not affected by the payments made to dairy producers.
According to Kohl, the decrease would be part of a general cut in compensation to farmers involved in price-support systems.
Wisconsin dairy producers have received over $414 million under the MILC program Kohl said.
“[MILC] allows farmers to stay on the land,” said Sue Beitlich, a Stoddard farmer and President of the Wisconsin Farmer’s Union. “We contribute so much to Wisconsin’s economy.”
The program has helped dairy farmers throughout the nation, Beitlich said, and all dairy producers, regardless of farm size, can participate if they apply.
“For us personally, we wouldn’t have gotten through some of the spring planting seasons without the MILC,” Beitlich said.
No payments have been made through MILC since May because milk prices are currently above the target level.
In the years before 2004, however, dairy producers saw milk prices fall.
“In particular, in 2002 and most of 2003, we saw record low prices,” said Professor Ed Jesse of the Department of Agricultural and Applied Economics. “As a result, farmers are still digging out from the bad times.”
Jesse said the total cost of the national program has been just over $2 billion, 20 percent of which was paid to Wisconsin farmers alone, more than any other state.
However, Jesse said controversy has arisen over a cap in compensation. Once a farm produces more milk than allowed by the cap in a fiscal year, the farm is no longer eligible to receive payments on milk produced that year after the cap has been met.
This means large farms, like those in California, receive less money than smaller farms, which are more common in Wisconsin and the Midwest. Large farms that regularly meet the cap feel this cap is unfair, according to Jesse.
Bush’s proposed budget will be voted on in the fall.
“[MILC] has been the saving grace for thousands of farmers all across Wisconsin,” Congressman Mark Green, R-Wisconsin, said in an e-mail. “However, it looks as though we have some work to do if we’re going to get the funding levels up to where they need to be to realize the program’s potential.”
