There were some surprises in who signed up for the Dairy Margin Protection Program (MPP-Dairy), according to figures announced recently by USDA.The biggest surprise is who didn't sign up: almost half of all dairies in the country
Getting a $4 per hundredweight safety net for just $100, even if it's only a catastrophic meltdown net that might not ultimately save anyone from bankruptcy if it came into play, seems like a no-brainer. And yet, nearly half of all milk producers disagreed.
Nevada had the highest sign-up rate of all states at 90 percent; Utah was second at 80 percent. Wyoming was the lowest at just 5 percent; Alabama was next at 29 percent. The nation's biggest dairy states, California and Wisconsin, had sign-up rates of 69 and 54 percent, respectively.
Among producers who joined MPP-Dairy, USDA said 55 percent opted to buy extra margin coverage. But it gave no breakdown of what levels.
My hunch is that small herds, thanks to lower premium rates, chose $6.50, $7.00 or $7.50 per hundredweight. But I doubt many big herds went higher than $6.50, due to what would have been a big up-front annual premium payment.
Class III futures prices below $14 have begun appearing at the Chicago Mercantile Exchange, which means the chances of MPP-Dairy payments at high coverage levels are growing. They also mean that anyone who rolled the dice and bought extra coverage may have guessed right, and hooray for them.
But for the dairy industry, in general, it would be a sign of problems that it really doesn't want to have again so soon after 2009.
A state-by-state breakdown of sign-ups is available on the internet at http://www.fsa.usda.gov/Internet/FSA_File/mpp_applications_011515.pdf
The author has served large Western dairy readers for the past 37 years and manages Hoard's WEST, a publication written specifically for Western herds. He is a graduate of Cal Poly-San Luis Obispo, majored in journalism and is known as a Western dairying specialist.
