The program was created as part of the 2014 US Farm Bill, and was designed to provide financial assistance to dairy farmers who fall behind in profit margins.
However, a portion of the US dairy industry believes the method used to calculate profit margins does not reflect actual costs to the farmer, leaving them financially vulnerable.
Continued declines in net farm income for the year
The USDA’s Economic Research Service (ERS) has seen a 45% decline in net farm income since 2013, the largest three-year drop since the Great Depression, committee chairman Mike Conaway (R-Texas) said during the hearing.
Overall, ERS is forecasting a 50% decline in net farm income by the end of 2017.
“It’s hard for any of us to imagine our income being sliced in half,” Conaway said in his opening statement.
“We are told that one in 10 farms are now highly or extremely leveraged. Nominal debt levels are at all-time highs and real debt levels are approaching where they were prior to the 1980s farm financial crisis."
However, one of the “bright spots” for 2017 will be the better-than-expected returns on dairy commodities, according to USDA chief economist Robert Johansson.
The USDA predicted that volumes of dairy products will rise by $720m in 2017, due to increasing global prices and expanding US exports.
‘We need the right farm bill’
Part of the solution to alleviating declining farmer income would be to amend the US dairy program, which has received criticism from dairy processors and producers since it was established in 2014.
“I can tell you, talking to my producers and producers around the country, I think it's going to be a tough sell, because they look at this thing as, ‘If I'm not going to get any money out of this, then I'm not going to do it,’” committee ranking member Collin Peterson (D-Minn.) said during the hearing.
Peterson suggested a different farm bill approach that would make the program a five-year membership instead of an annual one in order to boost numbers as members are more likely to see the benefits of the program.
“I agree we need to write this farm bill on the basis of what’s needed for our producers and not some outside budget forces that somebody has come up with.”