Wins for dairy in One Big Beautiful Bill

In a recent presentation, Brook Duer, staff attorney, Penn State Center for Agricultural & Shale Law , shared information on H.R. 1 (the One Big Beautiful Bill Act). The legislation enacted on July 4, 2025 created a reconciliation bill that made appropriations to select agencies and programs. Title I of the bill addresses agriculture, with numerous Farm Bill programs and provisions partially included. “It was to fund some agency operations in the absence of the normal funding that might be there,” said Duer, explaining the legislation. “Then it became a big pot and lots of other things were thrown in. Now that there’s a shutdown, we see what the bill does – provide stop-gap continuation of certain things that might have stopped if not for its enactment because we also don’t have a Farm Bill.” Numerous Farm Bill programs apply to dairy, and those that don’t directly apply to dairy may apply to dairy farmers simply because the Farm Bill expired. “Other Farm Bill Programs were not included and are set to expire … some on December 31, 2025,” said Duer. “Some were previously extended by the Inflation Reduction Act (IRA) to 2031. It depends on the program.” The concept of the “skinny Farm Bill,” a stripped-down version of the actual bill, would extend more aspects of the Farm Bill if there’s no passage of a complete bill. Title I of H.R. 1 is the Committee on Agriculture, Nutrition & Forestry. “The Dairy Margin Coverage (DMC) Program received some changes,” said Duer. “This is the most wildly successful program that the U.S. has ever had regarding income security for dairy farmers. Dairy farmers who participate receive payments when the difference between an established national milk price and the defined average national feed cost goes below $9.50. It’s a way to guarantee at least that much of the margin on production.” The key innovation of DMC is that it creates dual responsiveness to either milk prices or feed prices: changes in one or both can trigger payment. The DMC was originally authorized in the 2018 Farm Bill, and was included in subsequent extensions, so it was not in danger of expiring in September. “DMC in H.R. 1 was expanded by taking the basic core package (Tier 1 coverage), which has lower premiums and covers the first five million pounds produced annually,” said Duer. “A farmer could insure that much of production with lower premiums. It has been increased from five million to six million pounds because a lot of small and medium size dairy farms were exceeding five million pounds. That was the first major change.” The percentage enrollment shows the program’s success, with New York, Pennsylvania, Vermont and Virginia showing high overall participation. DMC payments have not been large this year compared to years when milk markets were in worse shape. “There were changes on how a producer establishes production history with regard to the five or six million pounds” said Duer. “There was some fine-tuning with the way annual production is determined. In 2019, the first year for DMC, it was based on 2011 to 2013 production. Then it was extended to include subsequent years up to 2019. Now, for established producers, production history is based on 2021, 2022 and 2023.” New dairy producers will determine annual production for DMC based on either average monthly production or herd size. There will be ongoing tweaking for more accurate production history numbers. Regarding renewable energy, Duer said H.R. 1 includes reauthorization of programs focused on biofuel production as well as some programs that extended tax credits for clean fuel production. These tax credits now apply to animal manure that is converted to forms of transportation fuel. This allows farmers to benefit through the 45z Clean Fuel Production Credit through 2029. H.R. 1 adds funding that allows USDA to survey dairy processors to help calculate more accurate make allowances. Make allowances help determine pooled pricing for Classes II, III and IV dairy products under the Federal Milk Marketing Order (FMMO). Another aspect of the bill increases funding to the National Animal Disease Prevention & Management portion of the Animal Health Protection Act. This action was triggered by the outbreak of highly pathogenic avian influenza (HPAI) that affected dairy farms. Although Northeast dairies remained free of HPAI, many farms initiated tighter biosecurity and plans to manage an infection. A new program, the Supplemental Agricultural Trade Promotion Program, will double USDA’s trade capacity because the previous programs (Market Access Program and Foreign Market Development Program) are still in place. Renewals are solid for conservation programs including the Environmental Quality Incentives Program (EQIP), Conservation Stewardship Program (CSP) and Agricultural Conservation Easement Program (ACEP). However, the current shutdown has closed offices that manage these programs. Of interest to organic producers is the reauthorization of programs that track organic market data and assist farmers transitioning to organic production. Although this provision is targeted at horticultural production, it may apply to dairy farmers who produce their own feed or sell other commodities along with dairy products. Some Farm Bill programs are not included in H.R. 1, including the Dairy Forward Pricing Program, which authorizes processors and other customers to purchase milk at a price lower than the FMMO price in a particular federal order area. Also not mentioned in H.R. 1 is the Dairy Indemnity Payment Program, which compensates farmers for milk contaminated by chemicals or toxic residue. Under this program, farms are covered for losses from culling animals from the herd as well as losses from discarded milk due to contamination. Farmers would be paid fair market value for lost products. Duer discussed the potential “dairy cliff” that threatens dairy farmers if there is no Farm Bill. “It’s the idea that we would revert to permanent law without a Farm Bill,” he said. “It’s the self-exploding mechanism for not enacting a new Farm Bill.” Permanent law refers to the Agricultural Act of 1949, which was passed as a way for the national government to stabilize commodity prices at the producer level. “It would revert to an ancient equation that would be so high that the dairy industry would come to a grinding halt,” said Duer. “Dairy is the first commodity that will have its price jacked up in this manner without a Farm Bill come January 1, 2026. Dairy ends up being the guinea pig, which is why it’s called the ‘dairy cliff’ – dairy is the first to drive over the cliff without a Farm Bill.” In addition to arming themselves with information about changes, dairy farmers should communicate with their tax preparer and financial advisor for optimum farm finance management. by Sally Colby Featured photo: HPAI outbreaks have led to farms initiating more stringent biosecurity protocols including foot baths for both employees and visitors. One aspect of H.R. 1 is increased funding to the National Animal Disease & Prevention Management portion of the Animal Health Protection Act. Photo by Sally Colby