Deficit Reduction Act of 2005 Passed the House

Dr. Cameron Thraen, Milk Marketing Specialist, The Ohio State University (top of page)

The Deficit Reduction Act of 2005 passed the House on February 1 by only two votes. The Milk Income Loss Contract (MILC) provisions are: "Sec 1101 National Dairy Market Loss Payments (MILC Payments)" amends the payment structure and extends MILC payment authority; from 2006 FSRIA: "Payments to a producer under this section shall be calculated by multiplying (as determined by the Secretary) the payment quantity for the producer during the applicable month..."

($16.94/cwt) minus (Class I milk price per hundredweight in Boston under the applicable Federal milk marketing order) times (45%).

The Deficit Reduction Bill substitutes the following for the 45%:

Ending September 30, 2005, they get 45% of the payment;
Beginning October 1, 2005, and ending on August 31, 2007, they get 34% of the payment; and
Beginning on September 1, 2007 and ending September 30, 2007, farmers get 0% of the payment effectively ending the program.

The maximum payment quantity remains at 2.4 million pounds. It looks like the sign up period and duration of coverage is extended to September 30, 2007. Note that the September 1, 2007 through September 20, 2007 rate is 0.0%. You might wonder why such a convoluted way to end the program. As always, there is method to the madness. If the current farm legislation is extended and a 2007 farm bill becomes a 2009 farm bill, the MILC program will be extended at a rate of 0.0%. Meaning? Any direct extension of the MILC would have to be re-authorized at that time to have a rate of payment greater than 0.0%.