• Basic coverage, at a margin of $4/cwt., is offered at no cost. Above the $4 margin level, coverage is available in 50¢ increments, up to $8/ cwt. Premiums are fixed for five years, but will be discounted by 25% in 2014 and 2015, for annual farm production volumes up to 4 million lbs. Premium rates are higher at production levels above 4 million lbs.
• USDA agreed with NMPF that the lower premiums will apply to the first 4 million lbs. of a farm’s enrolled annual milk production, regardless of the farm’s total production. For example, a farm with an annual production history of 8 million lbs. that elects to cover 50% of its production history would pay the lower rate on all 4 million lbs. enrolled in the program. Farmers will be able to change their coverage (the percentage of milk insured, as well as margin level) on an annual basis, with USDA establishing a 90-day enrollment window of July 1-Sept. 30 each year after 2014.
• The MPP’s margin definition is the national all-milk price, minus national average feed costs, computed by a formula NMPF developed using the prices of corn, soybean meal and alfalfa hay.
• Farms in the program will be assigned a production history consisting of their highest milk production in either 2011, 2012 or 2013. A farm’s production history will increase each year after the farm first signs up, based on the average growth in national milk production. Any production expansion on an individual farm above the national average cannot be insured.
• When the margins announced by USDA for the consecutive two-month periods of Jan.-Feb., Mar.-Apr., May-June, etc., fall below the margin protection level selected by the producer (from $8/cwt. down to $4/cwt.), the program will pay farmers the difference on one-sixth (or two months’ worth) of their production history at the percentage of coverage they elected to insure. Premiums must be paid either in full at sign-up, or 25% by Feb. 1, with the remaining 75% balance to be paid by June 1.
NMPF had urged USDA to provide greater flexibility on producer premium payment, such as through milk check deductions. “While USDA advised us they did not have time to set up such a system for the initial launch of MPP, we will continue to work with the department in an effort to modify this feature for future years,” Mulhern said.
“The new Margin Protection Program is more flexible, comprehensive and equitable than any safety net program dairy farmers have had in the past,” Mulhern said. “It is risk management for the 21st century, and we strongly encourage farmers to invest in using it going forward.”
USDA also issued the rules for another element of the Farm Bill’s dairy title, the Dairy Product Donation Program. Under that program USDA will purchase consumer-packaged dairy products for food assistance programs during extreme low-margin periods. “This is a positive step as well,” said Mulhern, “since it will stimulate demand, help dairy farmers when they need it most, and provide additional food to those in need.”
Visit www.nmpf.org for more information.