PITTSFIELD -- Dairy farms could be dealt a change in how the federal government lends a helping hand when milk prices drop.
Both the U.S. Senate and U.S. House of Representatives have passed farm bills that include an insurance program that aims to protect dairy farms when cow feed and fuel prices hurt dairy farm earnings.
The margin insurance program would bring an end to price supports for dairy farms, according to a farm advocacy group. But details on the bargaining table will determine whether it's worth the premium and provides proper safeguards.
One of the many questions about the program: Will the farm bill pass with the insurance included?
Executive Director Douglas Gillespie, of the Massachusetts Farm Bureau Federation, which represents the interests of agriculture in the Bay State, said it's too early to tell.
"It is one of dozens of big enough issues that anyone or any cluster of them could hold up the farm bill," Gillespie said.
The insurance program is the most significant provision affecting dairy farms, Gillespie said. Dairy farmers also should pay attention because if action isn't taken on the farm bill before Jan. 1, then a 64-year-old law could lead to a dramatic increase in the cost of milk.
There are 21 dairy farms in Massachusetts, according to the Massachusetts Office of Energy and Environmental Affairs.
The federal farm bill needs to be renewed every five years, although the current farm bill is an extension from the 2008 farm bill. The bill establishes funding for agriculture and food programs, although this bill includes stipulations on food stamps.
A dividing issue on the insurance program between the House and Senate bills, Gillespie said, is who would be eligible. Gillespie said the U.S. Senate version favors what dairy farmers would prefer.
Dairy farmers hit with declining milk prices might buy extra cows and produce extra milk, thereby flooding the market, Gillespie said. The Senate version of the insurance program would set growth limits and wouldn't pay out to members who continue to produce more milk, he said.
The U.S. House version doesn't include the oversupply management program.
"That dilutes the program," Gillespie said. "The big farms in the west will continue to add cows and efficiencies and economies of scale and still be eligible for insurance."
There also is concern that if no action is taken before Jan. 1, a law set in 1949 will kick in, sending milk prices spiraling. Gillespie said he doubts Congress would allow that to happen.
The Agricultural Act of 1949 sets a much higher price for governmental purchases of cheese, butter and other dairy products than the U.S. has seen in decades. The government cut the price in recent decades because if it didn't, more companies would sell to the government than to retailers, unless consumer prices rose to match.
Gillespie said the volatility in an already volatile market hurts farmers.
"Every farmer or any type of farmer you'd like as much certainty as possible as you're continuing farming. The farm bill sets the rules in a lot of commodities."
Material from The Associated Press was used in this report.