The 2014 Farm Bill provides the most comprehensive reform to the U.S. federal dairy farm safety net seen in decades. In place of milk price and revenue support programs the new Farm Bill creates a Margin Protection Program for Dairy Producers (MPP-Dairy). MPP-Dairy is specifically designed to be simple to use and appealing to all dairy producers regardless of management style or business model. First, it provides dairy producers the opportunity to annually self-select coverage levels to protect against declines in national, rather than farm-level, income-over-feed-cost margins. Second, the premium rates are fixed at predetermined levels explicitly written into the Farm Bill. Finally, farms of all sizes can purchase margin protection near their historical maximum levels of milk production. For a detailed discussion of the specific dairy title provisions of the new 2014 Farm Bill see here.
In today's post I will introduce an interactive dashboard demonstrating the features of the Margin Protection Program. The MPP-Dairy dashboard is fully interactive and functions on internet browsers supporting Adobe Flash and Shockwave players (see more technical information at the end of the post). MPP-Dairy dashboard users may adjust key decision variables such as the coverage year (using 2000-2013 data), coverage level, coverage percentage, and production history to illustrate how the program is designed to perform. Understanding how MPP-Dairy is designed to work as a risk management tool in different milk and feed price environments is important because MPP-Dairy choices are not 5-year decisions, rather dairy farmers can change their coverage options each calendar year. Given that there are 9 coverage levels and 14 coverage percentage options, each year a participating dairy operation may choose from as many as 126 coverage combinations. As a result, this MPP-Dairy dashboard emphasizes the strategic thinking that needs to occur during each calendar year decision.1
For side-by-side comparisons, additional dashboards may be opened in a separate browser window by clicking here.
The dairy production margin used to trigger MPP-Dairy payments uses the USDA National Agricultural Statistics Service (NASS) announced all-milk price per hundredweight, the USDA NASS announced corn price per bushel, the USDA NASS announced alfalfa hay price per ton, and the USDA Agricultural Marketing Service announced central Illinois high protein soybean meal price per ton. The historical prices used in the dashboard were collected from the "NASS Quickstats" database (see here) and the "USDA Livestock & Grain Market News Portal" (see here).