Attention Dairy Farmers! Milk Margin Protection Program Improvements Secured

 

Coming soon to your local USDA FSA Office

In the recent federal legislative action surrounding the budget, multiple changes were made to the Margin Protection Program.  It is important for all dairy farmers to fully investigate these changes and determine if this improved program will help manage risk on their farms. 

Here are the main changes

The Leahy-led dairy provisions make six specific changes:

  • Directs the Secretary of Agriculture to immediately reopen the sign-up period for calendar year 2018 for the Margin Protection Program (MPP) to allow farmers to reevaluate the costs and protections the program can now provide their farm.  The sign up period will re-open after final rules are issued by USDA.
  • Immediately moves the MPP calculations and potential payments to a monthly basis (currently bimonthly) to improve the accuracy and timeliness for helping farmers.
  • Immediately cuts the premium costs for Tier I enrollment by nearly 70 percent to incentivize producer participation at meaningful levels of protection and makes that change this year.
  • Raises the Tier I threshold level corresponding to substantially lower premium costs to the first 5 million pounds of production (nationally equivalent to 220 cows), up from the current level of 4 million pounds of production (nationally equivalent to 175 cows). This will better align the program with the median U.S. dairy farm size, 223 cows, and encourage more family farms to participate and secure meaningful levels of protection to offer an effective farm safety net.
  • Waives $100 administrative fees for underserved producers, bringing the program in line with other USDA programs with similar service fee waivers.
  • Repeals the unfair statutory cap for the USDA’s underwriting costs for livestock insurance products.

Dairy farmers should discuss the potential for flexibility in payment for this program with USDA Farm Service Agency after the final rule is issued by USDA.

The following information may be helpful for farmers to decide to take part in the improved program and to determine what margin level may work for their individual farms. The numbers below were available at the writing of this article.  

At the Vermont Farm Show, before the new law passed, Agri-Mark Inc. presented the following margin calculations representing a two-month average:

 

Jan.-Feb.

March-April

May-June

July-Aug.

Sept.-Oct.

Nov.-Dec.

2018

$7.79

$7.02

$7.23

$7.79

$8.75

9.01

USDA has a graph and a chart showing the probability of a payment under the current program before the law passed based on a two month average.  To read this probability chart, there is a 57% chance that the margin will hit $7.00 in March-April 2018.  It is anticipated USDA will update its information when the final rule is issued to reflect the changes in the law including the monthly margin calculation.

Information to assist with your decision – Probability chart for 2018 from February 14, 2018

Margin Level

Jan-Feb 2018

March – April 2018

May – June 2018

July -Aug. 2018

Sept.- Oct.

2018

Nov.-Dec. 2018

Expected

$7.75

$6.90

$7.06

$7.78

$8.66

$8.98

$8.00

86%

98%

86%

59%

28%

19%

$7.50

14%

86%

70%

40%

15%

9%

$7.00

 

57%

48%

23%

6%

4%

$6.50

 

24%

26%

11%

2%

1%

$6.00

 

5%

10%

4%

1%

 

$5.50

 

1%

4%

1%

 

 

$5.00

 

 

1%

 

 

 

$4.50

 

 

 

 

 

 

$4.00

 

 

 

 

 

 

 

USDA Farm Service Agency will be able to answer questions about the Margin Protection Program and enroll participants after the final rule is issued by USDA.