Farm Bill changes safety net for dairy producers when margins fall

A new Farm Bill margin protection program provides dairy producers a financial safety net based on a formula that factors in the federal all-milk price, corn and alfalfa prices and the soybean meal price.

Dairy producers eligible for margin protection funding

Margin protection program is voluntary Program replaces old Milk Income Loss Contract payments Enrollment period is Sept. 2 through Nov. 28    

A new margin protection program under the recent Farm Bill will help U.S. dairy producers when the difference between the price of milk and feed costs falls below pre-determined levels set by the dairy farmer.

The voluntary program, established by the 2014 Farm Bill, provides financial assistance to participating farmers, when the actual dairy production margin is equal to or exceeds $4 per hundredweight (cwt) over a two-month period.

The new program replaces the old Milk Income Loss Contract (MILC) program that was put in place with the 2002 Farm Bill.

The Margin Protection Program gives participating dairy producers the flexibility to select coverage levels best suited for their operation. Enrollment begins Sept. 2 and ends Nov. 28 for 2014 and 2015.

Participating farmers must remain in the program through 2018 and pay a minimum $100 administrative fee each year. Producers have the option of selecting a different coverage level during open enrollment each year.

Dairy operations enrolling in the new program must comply with conservation compliance provisions and cannot participate in the Livestock Gross Margin dairy insurance program.

Farmers already participating in the Livestock Gross Margin program may register for the Margin Protection Program, but the new margin program will only begin once their Livestock Gross Margin coverage has ended.

The actual dairy production margin is calculated on a monthly basis at a national level from the all-milk, corn and alfalfa hay prices published by the National Agricultural Statistics Service in “Agricultural Prices” and the soybean meal price published by the Agricultural Marketing Service in “Market News-Monthly Soybean Meal Price Report.”  

“This is something we’ve been working on since the 2007 Farm Bill, said Michael Marsh, CEO of the California-based Western United Dairymen (WUD).

Safety nets for California dairy producers riding a roller coaster of lower milk prices and higher feed costs became a concern for WUD after the federal renewable fuel standard went in place and corn prices more than doubled to California milk producers, Marsh said.

New web tool

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.

Producers can also review historical data or estimate future coverage based on data projections. The secure site can be accessed via computer, Smartphone, tablet or any other platform, 24 hours a day, seven days a week.

“This is not an insurance policy,” Marsh said. “It is very much a subsidized program that benefits dairy producers.”

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U.S. Sen. Debbie Stabenow, chair of the Senate Agriculture Committee, said the bill gives dairy producers more financial stability while helping supply America with a steady supply of dairy products.

“We cannot afford to have our dairy farmers go bankrupt when there are sudden market swings, which is why we put together this new program,” Stabenow said. “Families need a reliable supply of dairy products at the grocery store, and that means we need farmers who can keep producing some of the very best dairy products in the world.”

Development of the online resource was led by the University of Illinois, in partnership with the USDA and the Program on Dairy Markets and Policy (DMaP). DMaP partners include the University of Illinois, the University of Wisconsin, Cornell University, Pennsylvania State University, the University of Minnesota, Ohio State University and Michigan State University.

The Margin Protection Program final rule will be published in the Federal Register on Aug. 29. The Farm Service Agency (FSA), which administers the program, also will open a 60-day public comment period on the dairy program. The agency wants to hear from dairy operators to determine whether the current regulation accurately addresses management changes, such as adding new family members to the dairy operation or inter-generational transfers.

Written comments must be submitted by Oct. 28, at www.fsa.usda.gov or www.regulations.gov.

The 2014 Farm Bill also established the Dairy Product Donation Program. The program authorizes USDA to purchase and donate dairy products to nonprofit organizations that provide nutrition assistance to low-income families. Purchases only occur during periods of low dairy margins. Dairy operators do not need to enroll to benefit from the Dairy Product Donation Program.

For more information on the Farm Bill, visit www.usda.gov/farmbill.

Visit the FSA online at www.fsa.usda.gov/factsheets, or stop by a local FSA office to learn more about the Margin Protection Program or the Dairy Product Donation Program

 

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