Bill would allow dairy farm savings plans
By CAROL RYAN DUMAS
A bill introduced by Sen. Mike Crapo, R-Idaho, and Sen. Charles Schumer, D-N.Y., would give dairy producers the ability to invest in farm savings accounts similar to a 401(k) account.
The Dairy Augmentation for Increased Retail in Yogurt (DAIRY) Act, S493, aims to give dairy producers a new tool to manage increased demand while providing a safety net for volatile market downturns.
"The proposal would allow operators to make deposits in the accounts during high-income periods and hold it until leaner times, when additional revenues are needed," Schumer said in a press release.
Tax liability on deposits would be deferred until contributions were taxed at the marginal rate upon withdrawal, similar to the way that education and retirement savings accounts operate.
Many Idaho producers and the U.S. dairy industry as a whole have been struggling to recover from the 2009 crash in milk prices that crippled income for producers who have large overhead costs, Crapo said in the press release.
The bill is meant to address the volatility dairy producers have experienced in the last few years, said Lindsay Nothern, a spokesman for Crapo.
"It's a tool to put away money in the good times so they have a cushion in the tougher times ... to kind of even out the ups and downs," he said.
It's no coincidence that the senators are from states with significant investments in yogurt facilities and recognize the long-term stability those investments bring to the table, he said.
While it's been hard for dairy producers to make a living, there's always pressure from the government to keep milk prices stable for consumers. The bill is a good way to negotiate those issues as the farm bill moves ahead. And if help for dairy producers is not in the farm bill, it is in this legislation, he said.
Idaho Dairymen's Association and Glanbia Foods both support the bill.
The name of the bill is kind of funny, but it's a good concept, said Mike Brown, dairy economist with Glanbia.
The legislation would allow dairymen to save for a rainy day and stabilize their income over time, he said.
Currently, in a good year, dairymen will make business purchases to avoid paying taxes on income, and that's not a good way to manage income in a volatile business. Since the crash in 2009, it's become evident that dairymen need to have more cash on hand. And cash on hand sits better with bankers, he said.
The dairy industry needs all the tools it can get. Dairymen can't continue to make money one year and lose their shirt the next, he said.
"This legislation provides a common sense financial risk management tool to reward savings, hedge risk and encourage future reinvestment," Crapo said.
The bill was introduced March 7 and referred to the Senate Finance Committee. Crapo and Schumer are in the process of gathering co-sponsors and working with the Senate Finance Committee leadership, Nothern said.