MPP-DAIRY calculates a two month average margin using the US All-Milk Price/cwt minus the cost of feed needed to produce 100 pounds of milk including the feed needed for dry cows and youngstock. The ration for the feed cost calculation includes corn, soybean meal and alfalfa. Milk, corn and alfalfa prices will be taken from the National Agricultural Statistics Service (NASS) monthly publication “Agricultural Prices” and averaged in two months periods. Soybean meal prices will come from the Agricultural Marketing Service (AMS) Central Illinois, Decatur, prices. Two month periods will include January-February, March-April and so on. Since 1997 this margin calculation has averaged $8.50, but since 2007 it has averaged $7.40 per cwt (Figure 1). Since MPP-Dairy is an insurance program and dairy producers choose their margin coverage level, an indemnity will be paid if the margin calculated falls below the coverage level chosen. So far only one period, March-April 15, has triggered a payment at the $8 coverage level, 49.5¢ per hundredweight.
Figure 1: Historic Dairy Margins using MPP-Dairy Formula
Dairy farmers may enroll for 2016 MPP-Dairy coverage, July 1-Sept. 30 2015, at local USDA offices. Participating farmers must remain in the program through 2018 and pay a $100 administrative fee each year. Producers have the option of selecting a different coverage level, margin amount and percentage of milk covered, during open enrollment each year. In addition to margin levels selected, MPP-Dairy payments are based on an operation’s historical production which will increase by 2.61% in 2016 if the operation participated in 2015. Producers must submit form CCC-782 for 2016, confirming their Margin Protection Program coverage level selection, to the local Farm Service Agency (FSA) office. If buying coverage above the $4.00/cwt. catastrophic level for 2016, dairy producers can either pay the premium in full at the time of enrollment, or pay a minimum of 25% of the premium by Feb. 1, 2016. The remainder of the premium will be due June 1, 2016.
USDA has an online resource available to help dairy producers decide their level of coverage. A web tool, available at http://www.fsa.usda.gov/mpptool, allows dairy farmers to quickly and easily combine their unique operation data and other key variables to calculate their coverage needs based on price projections. Producers can review historical data or estimate future coverage based on price projections. The web tool can be used on computer, mobile phone, or tablet. Soon a revised web tool will be released which will factor in more individual dairy farm information to more accurately project the possible MPP-Dairy impact for the dairy.