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Glitch disrupts margin sign-up

Published on November 17, 2011 3:01AM

Last changed on December 15, 2011 11:10AM

Limited funding frustrates dairies seeking insurance


Capital Press

Many producers who wanted to participate in USDA's Livestock Gross Margin Dairy insurance program came away frustrated when the government's computers shut down early.

The Risk Management Agency opened the one-day sales period at about 3:30 Central Time on Oct. 28. Thirty to 45 minutes later, the computers crashed and producers were shut out of the process.

"I know some people were terribly upset because they couldn't get insurance, but in another 15 minutes we would have hit our (funding) limit," said Shirley Pugh, RMA director of public affairs. In the short period of time the system was running, the program committed more than $5 million of its $7 million in annual funding.

"The truth is if we had $100 million, it would sell out," she said.

Technicians at the agency tried to fix the problem and finally gave up after midnight and went home, she said. The next sales date was Nov. 18.

"It's such a sought-after program, people wanted it. I know it was very frustrating, but there's nothing we can do about it," she said.

The insurance program, with subsidized premiums since December 2010, protects a producer's margin between milk prices and feed costs with a put option that protects against the downside price on milk and a call option that protects against the upside on the price of feed.

The pilot program expanded to all states in the contiguous United States for the 2011 crop year, which began July 1, 2010, and the $16 million in funding for dairy ran out in March 2011. While the program runs on a crop-year basis, funding is allocated by fiscal year. Producers had to wait until October, the beginning of the federal government's fiscal year, to buy the insurance.

This year, funding for dairy was cut to $7 million, even as interest in the program grew.

The possibility of a computer glitch is written into the policy -- there are no do-overs, Pugh said. Producers can try again on the next sales date, Nov. 18, but funding is limited. The agency doesn't have much left, and that's up to Congress.

Some producers in California were already anxious due to how little money was allocated to the program, said Michael Marsh, executive director of Western United Dairymen.

They came away frustrated because they worked hard to get the information to submit, and then "oops," he said.

"There was a lot of interest this go-round, a lot of folks interested in trying it out," he said.

The Washington State Dairy Federation has been fielding calls from producers, according to Jay Gordon, executive director.

"We have producers that are very frustrated. They don't like the fact that they got their bids in on time and because of computer system problems they were not accepted, so they don't have coverage now," he said.

They are also frustrated that a majority of the federal supplemental incentive dollars are now used up and the next window will be tight, he said.

Bob Naerebout, executive director of Idaho Dairymen's Association said he hasn't had a single call on the issue. Oregon Dairy Farmers Association has not returned calls.


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