WASHINGTON, Jan. 27, 2016 - Slightly more than half of the nation’s dairy farms have signed up for the second year of a program that provides a financial safety net for milk producers.

According to USDA’s Farm Service Agency, about 23,000 out of approximately 45,000 dairy farms nationwide have qualified for coverage under USDA’s Margin Protection Program, which allows farmers to recoup money when the margin -- the difference between the price of milk and feed costs – falls below a coverage level selected by the farmer. 

The signup rate is about the same as last year’s. The program was established by the 2014 farm bill.

As with last year’s signup, California farmers joined at a relatively high rate. Seventy-six percent of the state’s 1,485 licensed dairy operations signed up.

The vast majority of farmers nationwide – about 18,000 of the total of 23,328 -- signed up at the $4 coverage level, which requires payment of a flat $100 fee. Higher coverage levels require the purchase of premiums.

Last year, about 55 percent of participating operations elected for buy-up coverage. This year, only about 23 percent of dairy farmers who signed up opted for more than basic coverage. Most of those, about 4,000, did so at either the $6 or $6.50 coverage level.

According to the National Milk Producers Federation, 77 percent of the nation’s milk supply will be enrolled in the program this year, down from 80 percent last year. 

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“That’s obviously still a healthy number,” NMFPF spokesman Chris Galen said. “The slippage is likely due to current forecasts for 2016 indicating the program won’t be generating significant payments – which is similar to where payments in 2015 netted out.”

Low feed prices and higher average milk prices in 2015 created the large margins.

For most of 2015, the margin hovered between $7.50 and $8, but in the last two months, it took a leap that may put it above $10 for December when the final numbers are in. 
Unless the bottom falls out of margins in December, there will be no MPP-Dairy indemnity payment at any insurable level for the final two-month pay period,”  
observed Dairy Herd Management editor Dave Natzke in a Dec. 30 article.