Signups for the new Milk Income Loss Contract program began on Tuesday.

The program, authorized by the 2002 Farm Bill, compensates dairy producers when the Class I price in Boston, Mass., falls below $16.94 per hundredweight, with producers receiving 45 percent of the difference between that target and the monthly market price.

For example, the August Class I price was announced by the USDA last month at $10.48. That entitles producers to a payment of $1.44 per hundredweight ($10.48 + the $3.25 differential for the Boston federal order = $13.73. Then, take the target price of $16.94 – the previously calculated value of $13.73 = $3.21 x 0.45 = $1.44).

Producers can receive these payments on 2.4 million pounds of production each year.

Monthly program payments are scheduled to begin in October. According to a newsletter published by the National Milk Producers Federation, producers will be allowed to specify when they wish to begin receiving payments, and then payments will then be made monthly until the 2.4-million-pound production cap is reached. That means producers cannot pick and choose months in which to receive payments ¾ the payouts will come in successive months.

In addition to monthly payments, producers can receive retroactive transition payments on production dating back to Dec. 1, 2001.