Looking ahead, dairy farmers will have to calculate their basis for milk and feed (the difference between national and local prices) to determine what the margins actually insure, says Brian Gould, a dairy economist with the University of Wisconsin. In addition, the margin insurance calculation is based on a whole-herd ration, covering milking cows, dry cows and replacements. What happens if a farm does not raise replacements? How does that affect the margins he or she is insuring?
Here are some even more basic questions:
- Will sign-up be annual or for the entire five years?
- If it’s annual, can farmers switch back and forth between margin insurance and LGM-Dairy?
- When will sign-up deadlines be?
- When will premiums be due?
- How quickly will indemnities be paid?
Marin Bozic, assistant professor of dairy foods marketing economics at the University of Minnesota, spoke recently at the Central Plains Dairy Expo about a decision aide to which he and others are contributing. Bozic shared with the audience what is known so far about the farm bill and noted that dairy producers can choose the level of margin protection, from $4 to $8 per hundredweight in 50-cent increments.
The insurance also would have separate premium levels for the first 4 million pounds of milk produced by a single operation within a given year, with a different premium level for milk produced above that level.
With milk prices projected to be at or near record highs throughout most of 2014, Bozic doesn't expect payments to be issued during this calendar year, but you still should position yourself with what the program has to offer. The level of protection, however, is your choice.
An application is being developed by Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison, and John Newton, a dairy economist with the University of Illinois. This online decision tool will help producers work through difference scenarios. The tool will be available at.
The new farm bill also includes a dairy product donation program, which allows the government to purchase surplus cheese and other dairy products and donate them to charity to stimulate the market when prices are depressed.
So 2014 is going to be an interesting year for dairy, as well as all of agriculture. Educational efforts are being planned and will be announced as details become available. Unfortunately, this may not be the most opportune time (during spring work) to think about insurance. Nonetheless, you may not have a choice if you want to participate. Every indication so far is that you will. Stay tuned.