WASHINGTON, Aug. 28, 2014 -- USDA announced today the rollout of the Dairy Margin Protection Program (MPP) and an online tool giving the nation's 46,000 dairy producers easy access to the program's 126 possible coverage options.
The program was created in the 2014 Farm Bill and was required to be established no later than Sept. 1. As the program's name suggests, it puts more emphasis on producer margins - the difference between milk prices and feed costs -- than current milk prices as well as revenue support programs of the past. Producers can start enrolling in the program Sept. 2.
National Milk Producers Federation President and CEO Jim Mulhern said NMPF is pleased with the final outcome of the Farm Bill’s dairy provisions.
“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 in a statement. “It is risk management for the 21st century, and we strongly encourage farmers to invest in using it going forward.”
Coverage levels will be based on a producer's milk production history, which will be the highest level of annual production going back through 2011 and adjusted based on USDA's estimates of national average growth in the overall U.S. milk market.
The online resource for the program will enable producers to see how various coverage levels, with price projections, can be applied to their specific operations. The online resource will be accessible by smartphone, tablet, or computer, and no producer data will be saved.
Similar to new crop insurance provisions - which have yet to be unveiled by USDA - producers must be in compliance with conservation requirements. The final rule for MPP will be published in the Federal Register tomorrow and producers will have until Nov. 28 to enroll for 2014 and 2015 coverage.
Agriculture Secretary Tom Vilsack said the program provides a good way to protect producers from market and supply volatility.
“You really have to provide some kind of insurance protection, if you will, when feed costs go up . . . or when milk costs and milk prices come down significantly,” Vilsack said. “(MPP) basically speaks to that ratio, that differential between feed costs and the old milk price. “
The online tool was created in a partnership between the USDA and the Program on Dairy Markets and Policy (DMaP), whose partners include the University of Illinois, University of Wisconsin, Cornell University, Pennsylvania State University, University of Minnesota, Ohio State University and Michigan State University.
An update to the online tool is expected with the ability for producers to enter their own input costs to better determine margins. While FSA does not currently allow for online reporting, the online tool is capable of submitting MPP forms online, should that position change.
Producers have the option to protect between 25 percent and 90 percent of their production in 5 percent increments. Margin coverage options will also be available in 50 cent increments between $4 and $8 per hundredweight.
Today’s announcement also involved a program allowing the government to purchase extra milk in the event of a surplus for use in food banks and government nutrition programs. Vilsack said this could be a way to stabilize the dairy market and limit the problem of over-supply, which Sen. Patrick Leahy, D-Vt, said was the goal of the written legislation.
“We tried to draw it in such a way that there’s not an incentive for over-production," Leahy said. “The incentive is for sensible production.”
Leahy said the program is a good substitute for the Milk Income Loss Contract (MILC) program opposed by Republican congressional leaders. “We want our dairy farms to stay in production, and we don’t want anybody to be gaming the system and throwing things into surplus. I think you’ve got a good program.”
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