Dairy Margin Protection Program signup
Dairy farms need to consider if they want to participate in the 2016 Dairy Margin Protection Program, Farm Service Agency- USDA before the Nov. 20, 2015 deadline.
The 2014 Farm Bill established a new Dairy Margin Protection Program which offers dairy farms a year to year option to purchase income protection. The income protection pays if the margin between the U.S. All Milk price and the calculated cost of feed falls between $4 and $8. If the margin is lower than the level that a dairy farm has enrolled then they are eligible to collect payments similar to other revenue insurances. The projected price for 2016 does not suggest much, if any, improvement in milk price over the next 15 months. This suggests that if prices slip lower and crop prices continue to go higher, the margin may move to less than $8 and start to trigger some of the higher levels of margin coverage. Dairy farms can purchase coverage above the $4 margin level, which is available to all farms for 90 percent of their milk production history for the annual $100 per farm registration fee. In some cases a farm may want to buy up a higher coverage of margin protection by paying a premium to be entitled to a payment to maintain their pre-selected milk to feed margin. Farms will need to evaluate the premium cost verses the projected potential returns if the milk to feed margin moves to less than $8 per cwt. during 2016.
A tool has been designed that all farms may want to access online. This online tool helps you take a look at current market projections for both milk and feeds used to calculate the MPP Margin. One feature is the tool will provide you with a projected probability of the MPP Margin triggering payments at the various levels of margin protection. In addition, the tool estimates the potential payments based on these projections to provide dairy farms with an estimate of costs versus projected revenues. Having this type of information in hand may well help producers make a more informed decision for their farms enrollment in the 2016 Dairy Margin Protection Program, Farm Service Agency, USDA.
This program is a year by year election so each farm must make an annual decision to be enrolled. Once enrolled, the farm must choose at what level of margin protection they wish to purchase. Dairy farms must visit the FSA- USDA office by Nov. 20, 2015 to select coverage for their farms. Even farms that did not participate in the 2015 program have the option to enroll for 2016 if they now see a value in the risk management coverage that MPP can offer to their farm. Like any insurance program, we all hope that farms will never be in the situation that this program will make major payments because margins have fallen to $4 to $8.