WASHINGTON, Aug. 4, 2016 - Dairy producers will receive $11.2 million in federal payments because of tightening margins in May and June, but only a small amount of production nationwide will qualify for the payments.
The payment rate will be the highest since the Margin Protection Program was created under the 2014 farm bill, according to the Agriculture Department. Payments are triggered when the difference between the price of milk and the cost of feed falls below the coverage level selected by the farmer.
The average margin for the two-month period was $5.56 per hundredweight, so producers with MPP coverage levels of $6 to $8 will receive payments. However, more than 90 percent of the 159 billion pounds of milk production participating in MPP nationwide is enrolled at lower coverage levels, primarily $4.
The payments “are part of a robust, comprehensive farm safety net that help to provide dairy producing families with greater peace of mind during tough times,” said Agriculture Secretary Tom Vilsack said in a release. He used the announcement to encourage farmers to enroll in the program for 2017. The deadline for enrollment is Sept. 30.
MPP margins are rising sharply from the May-June level. Relying on USDA’s futures based forecast, the July-August margin is expected to be $7.50 per hundredweight and margins are expected to rise to about $10 later in the year, according to the National Milk Producers Federation.
The payment rates for May-June will range from 24 cents per hundredweight at the $6 coverage level to $2.24 at the $8 level, according to the Farm Service Agency..
Farmers in Minnesota and Wisconsin are among the most likely to receive the payments. More than 3 billion pounds of production in Wisconsin and 2.8 billion pounds in Minnesota are enrolled at the $6 to $8 coverage levels, according to FSA data.
The vast majority of production nationwide, 140.2 billion pounds, is enrolled at the minimum coverage level of $4 per hundredweight that only requires a $100 annual fee.