Milk Producers Council
  "Serving the Dairy Industry for more than 60 Years"

 

 

From The MPC Newsletter
Friday, March 28, 2014

The New "Margin Protection Program," Part One - An Intro
By Rob Vandenheuvel, General Manager

The ink is now dry on the new five-year Farm Bill; it’s the law of the land.  However, as we’ve written in previous issues of this newsletter, there are many details that still need to be ironed out in the “rule-making” process at the U.S. Department of Agriculture (USDA).  Major issues remain that were left somewhat vague in the bill language, and in the coming months, USDA will be providing clarity on those issues.

But that doesn’t mean we have to sit on our hands.  There were many details in the bill that were spelled out, and there’s no reason we shouldn’t be delving into those details immediately.  First, we need to determine what we know from the bill language, and what still needs to be clarified by USDA.  Here are some of the things we know for certain from the bill:

bullet

The Milk Income Loss Contract (MILC), Dairy Price Support and Dairy Export Incentive Programs are either repealed or will soon be repealed (MILC is temporarily extended until the Margin Protection Program is in place).

bullet

The replacement program – the Margin Protection Program – provides direct payments to participating dairy farmers when the margin between the U.S. All-Milk Price and a National Average Feed Cost (which is clearly defined in the bill language) goes below certain pre-defined levels.

bullet

The amount of milk that a dairy can enroll in the new program is based on the highest annual production for your dairy in 2011, 2012 or 2013.  For the life of the five-year Farm Bill, the only increases allowed to your facility’s production history are based on the overall national increases in milk production.

bullet

Each dairy facility is treated as a separate entity, just as the MILC program was handled.

bullet

The cost of participating in the program is $100 per year, plus any premiums due for dairies that “buy up” additional protection.  The premiums are also known, as they are locked in for the five-year Farm Bill.

bullet

There are two tiers of premiums:  a lower premium on the first 4,000,000 lbs of milk and higher one for all milk above that (however, what qualifies that first 4,000,000 lbs is not yet known...more on that in a future article).

Coverage Level

Premium on

first 4M lbs

Premium on

>4M lbs

$4.00

$0.000

$0.000

$4.50

$0.010

$0.020

$5.00

$0.025

$0.040

$5.50

$0.040

$0.100

$6.00

$0.055

$0.155

$6.50

$0.090

$0.290

$7.00

$0.217

$0.830

$7.50

$0.300

$1.060

$8.00

$0.475

$1.360

bullet

Payments are generated when the average margin in a two month period (Jan-Feb, Mar-Apr, etc.) is below the margin your dairy selected for the program.  (i.e., you elected to “buy up” the program to cover a $6.00 per cwt margin, and the average margin in Jan-Feb 2014 was $5.50 – you would receive $.50 per cwt on the milk you were able to protect).

So what are some of the issues that still need to be clarified by USDA?  I’m sure I’ve missed a few, but those issues include:

bullet

When the Margin Protection Program officially begins (there is reference to a September 1st deadline, but it’s not clear if the program starts then or signups begin then).

bullet

What the enrollment period is for dairies.

bullet

Whether the program is operated on a calendar year basis or fiscal year basis (like the Oct 1 – Sept 30 calendar for the MILC program).

bullet

Exactly how “new producers” will be defined.

bullet

How a dairy that changes locations will be treated.

bullet

How much of your production will be eligible for the lower premium.

bullet

How your premiums will be paid.

bullet

Whether you actually have to produce the milk in order to be eligible for the payouts.

In the coming weeks, we’ll be exploring these issues in more detail, particularly those that are clearly spelled out in the bill language (although we’ll certainly be discussing some of the “to-be-determined issues” as well).  As we go through this process (and I’m not sure how many “parts” there will be to this series), if you have a question about the program that we’re not answering, shoot me an email me at rob@milkproducers.org, and we’ll see if we can provide clarification.  In a perfect world, we’d probably wait until USDA releases the final rules so we have all the information.  But at some point in the not-too-distant future, dairy farmers will be asked to decide whether or not to participate in this program, and it’s important that you all make that decision with as many of the facts as possible. 

 

Send mail to office@milkproducers.org with questions or comments about this web site.
Copyright © 2007 Milk Producers Council