Milk producers can start signing up next week in the newly overhauled Margin Protection Program, which is more likely to provide payments to dairy farms during periods of low prices than the original version.
The enrollment period will run from next Monday to June 1, the Agriculture Department announced Tuesday. Producers already signed up for MPP this year will be required to re-enroll. Coverage under the program’s new terms will be retroactive to Jan. 1.
The Bipartisan Budget Act that Congress passed in February put additional money into the program and restructured premium rates to benefit smaller to medium-size producers.
USDA's announcement comes as dairy margins have sunk to a 20-month low.
"We recognize the financial hardships many of our nation’s dairy producers are experiencing right now. Folks are losing their contracts and they are getting anxious about getting their bills paid while they watch their milk check come in lower and lower each month,” said Agriculture Secretary Sonny Perdue.
The revisions to the program provide “some much-needed incentives for dairy producers to make cost-effective decisions to strengthen their farms, mitigate risk, and conserve their natural resources,” he said.
MPP provides payments to producers when the margin between the average milk price and the cost of feed falls below the dollar amount of coverage selected by the farmers.
The Bipartisan Budget Act made the following key changes to the program:
- Calculations of the margin will be made monthly, rather than bi-monthly.
- The amount of production that can be covered under lower, Tier I premiums was raised from 4 million pounds to 5 million pounds, the equivalent annual production of about 220 cows. The original limit of 4 million pounds is the equivalent of about 185 cows.
- Premiums for the first 5 million pounds were eliminated at the $4.50 and $5 coverage levels and sharply reduced at higher levels.
- Limited resource, beginning, veteran, and socially disadvantaged producers will be exempt from the program’s administrative fee.
Eligible farmers already enrolled in MPP may request a refund of the fee. Dairy producers enrolled in MPP will not be allowed to participate in the Risk Management Agency’s Livestock Gross Margin Insurance Plan for Dairy Cattle (LGM-Dairy). Producers with an active LGM-Dairy policy with targeted marketings insured during 2018 will be allowed to enroll in MPP-Dairy by June 1, but their coverage will start only after active target marketings conclude under LGM-Dairy.
Industry experts say that many larger operations are likely to choose LGM-Dairy or other revenue insurance products, which will be easier to obtain without an underwriting cap that was eliminated by the budget law.
USDA did not release signup numbers for 2018, but enrollment fell from 25,663 producers in 2016 to 20,314 in 2017 as interest in the program lagged. Some 18,807 producers last year signed up for the minimum, $4 coverage level in 2017.
The revised program is expected to be much more popular. The dairy margin fell to the lowest level since June 2016 during February at $6.88 per hundredweight, a 15 percent drop from January, according to the American Farm Bureau Federation. The February margin was down 35 percent from last year. Farmers enrolled at the $7, $7.50 and $8 coverage options will be eligible for a program payment of 12 cents, 62 cents and $1.12 per hundredweight respectively, according to Farm Bureau.
USDA is providing a web tool to help producers determine the level of coverage that would best serve them under a variety of conditions.
Michigan Sen. Debbie Stabenow, the ranking Democrat on the Senate Agriculture Committee who played a lead role in getting the MPP upgrades included in the budget law, welcomed the signup announcement. This "will allow our dairy farmers to sign up for new-and-improved coverage that will protect them from losses outside of their control and provide certainty for their businesses and our agricultural economy," she said.
Dairy producers also will have new insurance products available as a result of the budget law. The Federal Crop Insurance Corp. in February approved a revenue policy developed by AFBF and Farm Bureau Insurance Services that will allow producers to cover their milk production under the type of revenue policies that have long been available to crops such as corn, soybeans, wheat and cotton.
The department hasn’t hit the cap on livestock policies for a couple of years, but insurers may have been reluctant to propose new insurance products with the limit in place, according to Rob Johansson, USDA's chief economist.
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