MILC extension dropped from DHS appropriations.

Supporters of a two-year extension of the milk income loss contract (MILC) program were dealt a defeat when conferees pulled the measure from the Department of Homeland Security (DHS) appropriations bill for fiscal 2005. The proposal, which was sponsored by Sen. Herb Kohl (D-Wis.), would have extended the program past its scheduled expiration at the end of this fiscal year (Sept. 30, 2005). The amendment was estimated to cost $2.5 billion over 10 years.

Under the MILC program, all dairy farmers are potential recipients of direct government payments whenever the farm price of milk used for fluid consumption in Boston falls below $16.94 per hundredweight in any month. Some estimates show the total cost of the program could exceed $4 billion over its 3-1/2-year life, much higher than the original estimate of $1 billion. During the first 21 months of the program, milk prices at the farm level were sufficiently low that payments were triggered each month. During the last four months of 2003, market prices rebounded to the point that payments were not required. However, low market farm milk prices in late 2003 required direct payments to be made from January through March 2004. Some senators from Western states argue that the program does little for their larger dairy operations.

The issue has potential implications for the upcoming presidential election. President Bush endorsed the MILC extension during a campaign stop in Wisconsin, and accused his challenger, Sen. John Kerry (D-Mass.), of working against the interests of Wisconsin dairy farmers via his support for the Northeast dairy compact, which would disadvantage upper Midwest dairy producers.