WOOSTER, Ohio — Under the 2018 Bipartisan Budget Act, changes to the Margin Protection Program (MPP) should make it more farmer-friendly, according to Diane Shoemaker, dairy extension specialist with The Ohio State University.
The enrollment period for the new program runs through June 1.
The goal of the program is to protect dairy producers when the difference between the national all-milk price and the national average feed cost (the margin) falls below a certain dollar amount elected by the producer. When the margin is triggered, producers will receive a payment at a coverage level they have selected. This margin reflects the cost of feeding all animals on the farm per cwt. of milk produced.
According to information from the National Milk Producers Federation (NMPF), the program is designed to pay 1/12 of the farm’s production history at a coverage level between 25 and 90 percent. Additionally the NMPF reports the program will provide a base coverage of 90 percent of the production history at the $5 margin level at no cost for the first 5 million pounds and at the $4 margin level of catastrophic coverage for producers with more than 5 million pounds of milk.
Shoemaker said one of the biggest changes involved raising the first tier of covered milk production history, benefiting from lower premium rates, to 5 million pounds from 4 million under the previous program. Under the new program, there is no cost to margin coverage up to $5 per cwt.
Above 5 million pounds, the coverage rates for Tier 2 start at 2 cents per cwt. for a minimum margin coverage level of $4.50 per cwt.
Shoemaker added that the premium rates have also been reduced for the first 5 million pounds under Tier 1. She said the 5 million base would roughly cover production of about 200 cows averaging 25,000 pounds of milk per year.
Second, the margin calculations are now based on a monthly instead of a bimonthly basis. Under the previous program feed prices could be high and milk prices low one month and reversed another month, causing instability in farm income and expenses.
“Overall, I think farmers got a bad taste with the previous program,” she said.
The new program will offer payments when the average monthly margin is below that selected by the producer and payments will be made after the margin calculations are finalized.
“I think this change might be a small incentive for farmers to participate in the program,” she said. “There is more of a possibility if farmers choose to buy coverage if it looks like feed prices are high and milk prices are lower, they will receive an indemnity payment. They will definitely get paid faster.”
Shoemaker said producers who signed up under the former MPP for 2018 may request a refund if they qualify under the new program.
Another change to the program is an exemption for payment of the administrative fee for famers with limited resources, beginning farmers, disadvantaged farmers and veterans. In addition, participating producers may choose to opt out of the program and not pay the administrative fee.
“We appreciate the steps taken by USDA to implement the new MPP provisions. It is important to provide information on the changes to dairy farmers so they can make informed decisions about enrollment in the program for this year, and we look forward to assisting the department in this effort,” said NMPF President and CEO Jim Mulhern.
“NMPF worked with Congress during the past year to improve the dairy safety net to make it more effective for all farmers. While the previous structure of the program offered an inadequate safety net, the changes made this year greatly enhance the value of the program to farmers, and we really want them to consider how to use this program in 2018.
“With these changes in place, we will continue to work with USDA and Congress to further strengthen the program in the 2018 farm bill.”
Shoemaker added that the MPP and Livestock Gross Margin Insurance Program are both tools that will help producers minimize their risk during fluctuating prices.
“I am glad to see that Congress and the USDA did something,” she said. “Producers can buy coverage up to $8 per cwt. and receive a payment between the margin and that $8 amount. It will be a little help for them.”
For more information, visit USDA’s www.fsa.usda.gov/mpptool that allows dairy farmers to combine unique operation data and other variables to calculate their coverage needs based on price projections. Or, visit the NMPF at www.nmpf.org/milk-economics for resources and tools to help farmers determine the best insurance options for their operations.