An online tool is available to help dairy farmers make insurance coverage decisions under the new Dairy Margin Protection Program (DMPP).
USDA’s Farm Service Agency, the National Coalition for Producer Education (NCPE) and the National Program on Dairy Markets and Policy (DMaP) partnered to develop the web-based decision support tool for DMPP, as well as the Livestock Gross Margin-Dairy (LGM-Dairy) insurance program.
Access to the MPP Decision Tool and other educational material is available at the following websites:
A brochure identifying the features of the MPP Decision Tool is available here: brochure.
The MPP Decision Tool was designed to be easy to use and is optimized to run on all electronic devices, including home PC, smart phones, and tablets using Windows, iOS, and Android operating systems. Additionally, only one data point – the dairy operation’s production history – is need from the dairy producer to use the decision tool for the MPP decision.
Dairy farmers can use the MPP Decision Tool in as few as 4 clicks of the mouse:
Click 1: What is Your Production History? The dairy operation's production history is defined as the maximum calendar year milk production during 2011, 2012 and 2013. This is the only data point needed in order to generate unique MPP Decision Tool results with respect to MPP. The decision tool includes a downloadable form to help determine production history.
Click 2: Evaluate MPP Margin Forecast. Each day price forecasts of the dairy production margin are generated using CME Group futures market data. This information is used to forecast the probability of MPP payments for all 126 coverage options for the coverage year.
Click 3: Select a Coverage Level Threshold and Coverage Level Percentage. Different coverage options reflect a producer's ability to generate different margin levels (from $4 to $8 per hundredweight) and different coverage percentages (from 25% to 90%).
Click 4: Print Registration Forms. Tool users can elect a coverage level and coverage percentage and then print their farm-specific USDA FSA registration forms directly from the MPP Decision Tool. Alternatively, users on a mobile device can generate a PDF file displaying their coverage options selected from within the MPP Decision Tool.
After this four-step process, dairy farm operators can easily view and print for all 126 coverage options: (i) the total premium costs and administrative fee; (ii) forecast MPP payments to be made during the coverage year; and (iii) net MPP benefits (defined as the MPP payment minus the premium and administrative fee).
To highlight the risk management approach that needs to occur during the registration and coverage modification process, dairy farmers using the MPP Decision Tool have the ability to analyze historical U.S. milk and feed prices. This feature is for research purposes only, but provides the opportunity for dairy farmers to go back in time to determine how MPP would have worked as a risk management instrument had it been in place during prior years.
For dairy operators who seek to use their own expectations of milk, feed and margin price risk, the MPP Decision Tool will soon include an Advanced interface that will allow dairy operations to self-select all 48 milk and feed prices to determine how MPP may function to smooth dairy production margins.
With respect to LGM-Dairy, the MPP Decision Tool makes moving between MPP and LGM-Dairy a one-click solution. MPP Decision Tool users simply click the "MPP" or "LGM" option to toggle between the two web interfaces. The MPP Decision Tool incorporates the award winning LGM-Dairy Analyzer ©. LGM-Dairy Analyzer © is the sole software system available that allows dairy farm operators and insurance providers to examine forthcoming insurance contract offerings and anticipated premium costs. LGM-Dairy Analyzer © is used extensively by insurance providers and dairy farm operators across the U.S.
‘Train the Trainer’ materials and events
To complement this effort, DMaP will host five ”Train-the-Trainer” workshops across the U.S. beginning Sept. 9, 2014 (see Train the Trainer). Additionally, members of the DMaP team and other educators and trainers will conduct meetings geared to dairy farmers to help them learn to use this exciting new tool (see State Meetings).
As part of the educational effort DMaP will soon release a series of online materials including web videos, PowerPoints, printed materials, and links to other online 2014 Farm Bill decision tools. This material will provide farmers with MPP specific information such as: (i) learning how to calculate their own dairy production margin; (ii) learning how MPP dairy can be integrated into the existing suite of risk management options; and (iii) evaluating unexpected risks in milk and feed markets.
These DMaP educational materials are designed to be flexible to the schedule of the dairy operator or educator. Producers and educators can access the educational materials on their own schedule and needs; additionally, farmers and educators can refer back to these materials as a reference. Links to the supplementary educational material and Train the Trainer Event registration can be found online at: www.dairymarkets.org/MPP.
The MPP Decision Tool uses innovative and new peer-reviewed price forecasting techniques to provide dairy farmers with timely market information on milk and feed price probabilities to help with the MPP and LGM-Dairy decisions (Bozic, Newton, Thraen, and Gould 2014).
The MPP Decision Tool provides dairy farmers the opportunity to use farm specific milk production variables in conjunction with daily futures prices on milk and feed as part of the consideration for coverage-level choices under MPP and LGM-Dairy. The MPP Decision Tool calculates USDA commodity price estimates and then uses historical correlations among milk and feed prices in a simulation to estimate the financial returns from MPP for farmer-selected coverage options.
With respect to LGM-Dairy, the MPP Decision Tool includes the LGM-Dairy Analyzer © software. LGM-Dairy Analyzer © incorporates the insurance program structure and data obtained from futures markets to provide a farm-level evaluation of the risk management capabilities of the LGM-Dairy program.