USDA Secretary of Agriculture Tom Vilsack held a press conference on Thursday morning to announce that the federal agency has finalized the new rules for the Margin Protection Program for Dairy. Sign-ups for the new program begin on Tuesday, September 2, and run through November 28, 2014, for the upcoming year.
The Margin Protection Program for Dairy will be quickly known by many as MPP-Dairy. This new dairy program represents a monumental shift in federal dairy policy as it replaced three federal programs: the Dairy Product Price Support Program, the Dairy Export Incentive Program and the Milk Income Loss Contract (MILC) program. In addition to the newly minted MPP-Dairy, the Dairy Product Donation Program rules were also finalized on Thursday. That program doesn't require any specific action by individual dairy producers.
As for the MPP-Dairy . . . to sign up go to your local Farm Service Agency (FSA) office. There are two forms that must be completed:
• CCC-781 will establish a dairy farm's production history
• CCC-782 will document the coverage level, or how much milk you want to insure.
The U.S. Department of Agriculture (USDA) also launched a new web tool to help producers determine the level of coverage under the Margin Protection Program that will provide them with the strongest safety net under a variety of conditions. The online resource, available at www.fsa.usda.gov/mpptool, allows dairy farmers to quickly and easily combine unique operation data and other key variables to calculate their coverage needs based on price projections.
While the sign-up for 2015 runs from September 2 to November 28, 2014, sign-ups for future years will take place from July 1 to September 30 for each year. Unless renewed by future farm bills, the MPP-Dairy program will sunset on December 31, 2018.
Now for the important considerations:
This will be the only federal dairy program available to the masses. While some can still participate in Livestock Gross Margin Insurance for Dairy (LGM-Dairy), federal funding will not cover many operations. Plus, operators can only participate in MPP-Dairy or LGM-Dairy, not both. So, if your operation wants a safety net, you should highly consider signing up for MPP-Dairy.
If you miss the September 2 to November 28, 2014, sign-up period . . . there will be no second chances to insure 2015's production. The same goes for future sign-up periods, it's a yes or no decision, without redos. It's also important to note that once you say yes and sign up for MPP-Dairy, you are in the program until December 2018. There are no outs once enrolled.
By signing up and paying the $100 administrative fee, you are automatically enrolled in the $4 catastrophic margin coverage - which is the difference between the price of milk and feed costs. As for higher coverage levels, which range from $4 to $8 per hundredweight, that is a decision each individual dairy farm will need to make. Every 50-cent additional level of coverage comes with higher insurance costs. Despite the sticker shock at higher levels, remember that these premium costs are being shared with federal government. If you went on the open market, those premiums costs would be much higher.
How much milk can you insure? Dairy operators can pick between 25 and 90 percent of their production history. One cannot go above the 90 percent threshold because the authors of the program wanted each dairy operation to have some shared risk. Each farm's production will be based on the highest milk marketings from 2011, 2012 or 2013. There are provisions for new dairy farms embedded in the rules. Production levels will be adjusted based on yearly growth in national milk production.
Insurance payouts during poor margins will be determined by tethered months. That means January and February will have combined margins, March and April, and so forth.
There will be an extensive educational rollout on this program. Look at your September 25, 2014, issue of Hoard's Dairyman for more details. Also, we have posted the following four documents in our Dairy Policy E-source section. http://www.hoards.com/E_dairy-policy Bottom line, we have experienced prosperous margins in the dairy industry this year. That was far from the case in 2008 and 2009. The best time to prepare for poor markets is during good markets. Take a solid look at MPP-Dairy, and make your decision by November 28, 2014.
"For $100, this is a great investment," said Senator Leahy, D-Vt., during the press conference as he encouraged dairy producers to sign up for the MPP-Dairy program.
"I agree with the Senator for $100 sign-up, the catastrophic coverage offers good protection. However, each dairy farm will have to make its own decision," added USDA Secretary Vilsack.
