Low milk prices trigger Farm Bill payments to California producers

Eighteen California dairy operations will be eligible for over $300,000 in Market Protection Program payments, which was effectively an insurance policy against low milk prices under the 2014 Farm Bill.

Farm Bill to pay out $11m to dairy farmers under MPP

Market Protection Program was new dairy program to 2014 Farm Bill Voluntary program requires dairy producers to buy coverage to be eligible for payments 18 California dairy operations will receive over $300,000 in payments  

More than $11 million in financial assistance to U.S. dairy farmers will go out under a Farm Bill program designed to help milk producers when margins hit certain levels.

The Market Protection Program (MPP) is one of many programs under the 2014 Farm Bill that assists American farmers and ranchers during troublesome market conditions.

In California this means 18 dairy operations will receive over $305,000 in payments based on their coverage levels for the May/June period. No payments will be issued to Arizona milk producers.

According to the U.S. Department of Agriculture, the payment rate for May/June 2016 will be the largest since the program began in 2014.

Dairy producers who enrolled at the $6 through $8 margin trigger coverage level will receive payments. MPP-Dairy payments are triggered when the national average margin (the difference between the price of milk and the cost of feed) falls below a level of coverage selected by the dairy producer, ranging from $4 to $8, for a specified consecutive two-month period. 

The national average margin for the May/June 2016 two-month consecutive period is $5.76277 per hundred weight (cwt.), resulting in the following MPP payment rates:

  • $6.00 coverage = $0.23723 cwt. payment rate
  • $6.50 coverage = $0.73723 cwt. payment rate
  • $7.00 coverage = $1.23723 cwt. payment rate
  • $7.50 coverage = $1.73723 cwt. payment rate
  • $8.00 coverage = $2.23723 cwt. payment rate

The MPP is a program first introduced in the 2014 Farm Bill that replaced Market Income Loss Contract (MILC) payments.

All final USDA prices for milk and feed components required to determine the national average margin for May/June 2016 were released on July 29.

Dairy farmers who want to participate in the 2017 MPP offerings have until Sept. 30 to enroll. To participate in buy-up coverage, a producer must pay a premium that varies with the level of protection the producer elects.

To learn more about the Margin Protection Program for dairy, visit the Farm Service Agency (FSA) online at www.fsa.usda.gov/dairy or visit a local FSA office. To find the local FSA office, visit http://office.usda.gov.

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