Dillivan explained that participating producers will elect what percent of their milk production to be covered (i.e. "Coverage Percentage") and the level of margin coverage (i.e. "Coverage Level"). These annual elections will determine their total annual premium and their potential indemnity payments. Producers may elect a Coverage Percentage between 25 percent and 90 percent of their ADPH, in intervals of 5 percent. Producers also elect their Coverage Level from $4 per hundredweight up to $8 per hundredweight in intervals of $0.50 per hundredweight.
He added that if the ADPM for any two-month period falls below a producer's elected margin Coverage Level, this difference will be paid on the Coverage Percentage of their ADPH divided by six.
"Annual premiums are based on production history and level of coverage. For dairies with 4 million pounds of milk or less in their production history, the premium per hundredweight for each level of coverage is shown in the second column of Table 1. Premiums increase as margin coverage increases. Premiums are also higher for larger production levels," he said.
Dillivan added that for participating dairies that exceed 4 million pounds of milk production, the rate from the second column of Table 1 will be charged on the first 4 million pounds, and the rate from the third column of Table 1 will be charged on production greater than 4 million pounds. To encourage participation in the program, particularly for smaller scale producers, premiums association with milk production of 4 million pounds or less (second column) will be reduced by 25 percent each calendar year for producers participating in 2014 and 2015.
"As with most new USDA programs, specific details of the MPP will be determined as the rules and regulations are written to administer the program," Dillivan said. "According to the farm bill, the MPP is to be established by September 1, 2014; however, it remains unclear whether participation can commence before September 1 if rules have been established by then."
Each dairy operation that participates in the MPP will be required to pay an annual administrative fee of $100. A dairy operation is generally defined as one or more dairy producers that produce and market milk as one operation. Other ownership structures will be defined by the Secretary of Agriculture if necessary.
USDA Farm Service Agency has been tasked with writing specific rules for the MPP, including the timing of indemnity and premium payments, as well as how and when producers enroll in the program. Dairy producers should be alert for news concerning the release of relevant announcements.