It’s not a good time to be a dairy farmer in Massachusetts, and it hasn’t been for years. As of 2016, 90 percent of the Commonwealth’s dairy farmers reported enrollment in federal aid programs. Their economic situation became especially critical in 2009, when the recession pushed milk prices to record lows, and farmers sold their product for about half its production cost. Since then Massachusetts’ legislature and federal politicians have supported several other dairy subsidies (including MILC, Dairy-MPP, and DFTC), with no sign of the industry stabilizing.
“The situation for dairy farmers is about as bad as it’s been,”
Sunderland farmer Bob Williams told the Greenfield Recorder.
The Milk Income Contract Loss Program (MILC) was established in 2002 to compensate farmers when the cost of milk for fluid consumption in Boston dropped below $16.94 per hundredweight of product. It ran until the 2014 Farm Bill, which replaced this flat-rate reimbursement schedule with something more akin to an insurance program: the Margin Protection Program for Dairy (Dairy-MPP). Dairy-MPP, rather than referencing a specific market price for reimbursements like MILC, provides tiered reimbursements when the difference between the all milk price and the average feed cost falls below a certain amount selected by the producer. If the difference exceeds $5 (the base difference), producers pay higher premiums for more coverage. The all milk price by hundredweight of product has been trending downward since 2010.
Open the Books, a transparency organization dedicated to publishing every dime of federal and state spending, details payments from MILC (from 2009 to 2015) and Dairy-MPP (2015 to 2017) made specifically to Massachusetts dairy farmers. Keep in mind that in 2014, there were just 133 dairy operations in the state registered with Dairy-MPP. With only 165 total operations that year, 80 percent of the Commonwealth’s dairy industry was receiving this subsidy.
The Dairy Farmer Tax Credit (DFTC) was introduced by Massachusetts legislators in 2008 to further subsidize dairy farmers. Essentially, DFTC serves a similar function as MILC, but uses a federal different price standard (the Northeast Federal Milk Marketing Order, or NFMMO). Instead of direct payments to farms, the DFTC provides a tax credit to 97 percent of Massachusetts dairy operations. Legislators cap payments at a total of $4 million dollars, and the amount paid is based on a farm’s monthly losses. These monthly figures are summed to form the total tax credit per farmer for that year. Thus, if their calculated cost of production is lower than the NFMMO for 6 out of 12 months in a year, tax credits will be given for the total lost on those 6 months. The Massachusetts Department of Agricultural Resources annual reports provide more details on the program’s year to year operations.
Source: MDAR annual reports
Since 2012, all $4 million have been used, because the production price of milk has below the NFMMO every month. If the overwhelming majority of Massachusetts dairy farmers receive these credits, why haven’t their financial situations improved? Why has the number of farms in the state been steadily decreasing?
Kaila Webb is the Wellesley College Freedom Project’s intern for the Pioneer Institute. She is currently double majoring in Environmental Studies and Chinese Language & Culture.