Assessing Participation in the Milk Income Loss Contract Program and its Impact on Milk Production

Abstract

The MILC program, a counter-cyclical income support program, was designed to provide price support to dairy farmers. Since the inception of the MILC program it has been argued that the program is inefficient and rewards inefficiency by keeping high cost, small dairy farms in business. Large dairy producers have expressed concerns that the MILC payments have negatively affected their farming income. Using farm-level, ARMS data from 2005, this study investigated the factors that affect farmer’s decision to participate in MILC program and if participation in MILC has an impact on milk production. The results show that participation in MILC program is positively correlated with farmer’s educational attainment, organic certification subsidy, milk price, off-farm work by spouses, and financial record keeping. Further, medium sized dairy farms are more likely to participate in MILC program. Finally, results indicate that participation in MILC program has a positive impact on milk production.dairy farms, agricultural policy, Milk Income Loss Contract Program, two-step probit estimation, Agricultural and Food Policy, Livestock Production/Industries, H20, Q13, Q18,