A couple of months ago the details were released regarding changes to the Margin Protection Program for Dairy (MPP-Dairy). Those changes were included in the Bipartisan Budget Act of 2018 signed into law by President Trump.

At that time, it was unclear as to exactly when USDA would begin the registration and re-enrollment period for the 2018 coverage year. USDA recently announced sign-ups will take place from April 9 to June 1.

Without reviewing all changes to MPP-Dairy, it is critical to note a few aspects of the 2018 sign-up period.

Re-enrollment for everyone
First and foremost, it is necessary to make a new coverage election for 2018, even if you already enrolled for 2018 coverage during the previous sign-up period. While coverage under the modified program is retroactive to January 1, 2018, dairy operations that do not make a coverage election during the April 9 to June 1 period will not have coverage in the 2018 calendar.

Some 2018 margins are known
Secondly, with the margin calculations already complete for the first two months of the year, the payment based on the February margin of $6.88 will nearly pay for the entire tier 1 premium in 2018 at the $8 coverage level (which now covers production history up to 5 million pounds).

At $8 coverage, the February payment will be $1.12 per hundredweight. That averages out to 9.3 cents per hundredweight on an annual basis, even if no other months lead to additional payments.

As a point of reference, the tier 1 premium for $8 coverage is 14.2 cents per hundredweight, and further payments appear to be a near certainty as we move through the first half of the year. Only producers with more than 20 million pounds of production history or those with 2018 target marketings under Livestock Gross Margin-Dairy contracts will need to consider more carefully their decision to participate in 2018.

Calculations every month
Also, the provision to calculate margins on a monthly rather than a bimonthly basis is already having an impact. The January margin of $8.12 would have resulted in a bimonthly margin of $7.50 under the old provisions (the January $8.12 margin plus the February $6.88 margin would have averaged $7.50). This would have eliminated any payments for producers who signed up for anything less than $8 coverage. It also would have reduced the payment for $8 coverage to 50 cents per hundredweight over two months. That averages out to just 8.3 cents on an annual basis, compared to the 9.3 cents noted above.

More options
Of course, dairy farmers also can sign up for the Livestock Gross Margin for Dairy program (LGM-Dairy). Since large dairy farmers producing over 20 million pounds of milk will not see much difference between the old and new MPP-Dairy, LGM-Dairy might be a better option. Plus, the LGM-Dairy program has had its spending cap lifted by the Bipartisan Budget Act of 2018.

To learn more about both programs, read, “New budget deal strengthens dairy’s safety net” by Scott Brown.

To sign up for either program, go to your local Farm Service Agency (FSA).

To comment, email your remarks to intel@hoards.com.
(c) Hoard's Dairyman Intel 2018
April 9, 2018
Subscribe to Hoard's Dairyman Intel by clicking the button below