"The language in both programs may appear to be very straightforward, but interpreting the programs, each with its unique set of rules and triggers operating within a complex dairy economy is a challenging assignment.

"The report seeks to disentangle the devil in the details for both programs."

Thraen and Newton released the report with a group of agricultural economists as part of an on-going research and Extension education program known as the Midwest Program on Dairy Markets and Policy: 2013 Farm Bill Dairy Analysis Group. The program is supported by a consortium of dairy economists from Midwest U.S. universities who specialize in dairy policy.

In addition to Thraen and Newton, also contributing to the report were Marin Bozic of the University of Minnesota; Christopher Wolf of Michigan State University; and Mark Stephenson and Brian Gould from the University of Wisconsin.

The report addresses several key aspects of the competing safety-net proposals, including: the extent to which each of the provisions offers effective catastrophic risk insurance; whether they are actuarially fair, with premiums collected that offset liabilities paid out; what each program would cost a dairy; and if they present long-term obstacles to the growth of farms wishing to expand, Thraen said.

The researchers analyzed a variety of participation scenarios with varying levels of feed cost and milk pricing and found that the DSA and G-S provide an effective financial safety net for farmers as they both offer catastrophic risk and shallow-loss insurance and help enhance farm revenue by providing effective protection against ruinous low margins.

"While the intent of the two programs, to provide an effective and affordable income safety net, is the same, the mechanisms to achieve this are different," Thraen said. "The title of the report (Shared Potential, Shared Concerns and Open Questions) captures the essence of our conclusions.

"These programs have shared potential, shared concerns, and leave open questions."

The group is also developing an online decision tool to allow dairy farmers to weigh the benefits of participating in the final program in the next farm bill.

The interactive tool, which will be launched as soon as there is a definite program, will help farmers to determine which level of supplemental insurance would provide the most benefit for their operation and at what cost, Thraen said.

The full report can be viewed at http://go.osu.edu/ThraenDsa.


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