Dairy-Margin Protection Program (MPP)

Jeremy Daubert jdaubert@vt.edu, Rockingham County Dairy Extension Agent

It is time again to consider signing up for the Dairy-Margin Protection Program (MPP). This year’s election period runs through September 30th for the 2016 production year. Every farm that enrolled for 2015 will need to re-enroll before the deadline. You may enroll at a different coverage level than you did the previous year or at the same level. The chart below shows the premiums at each coverage level. The premium is per cwt (100 lbs of milk shipped) and is in addition to the $100 fee.

It is important to note that once you enroll in the program you are automatically enrolled through 2018, but you will still need to fill out the paperwork annually by the deadline for your coverage election. If a producer fails to pay the $100 fee by the deadline they will lose coverage, but still owe the $100 fee to the USDA. One additional change from last year is that the fee can be made in 2 payments. The $100 fee is due by September 30th, but any additional premiums may be paid 25% by February 1st of the coverage year and the remaining balance by June 1st.

The minimum “buy-in” for this program is $100 annually. That fee gets your farm in the program for the year at 90% of your historical production and a $4.00 margin insurance. This is a Catastrophic coverage that will most likely only pay out if margins are at or below 2009 levels.

There are a few things to consider with this program. If your dairy already uses a risk management program through traditional markets or by using LGM-Dairy, you may want to only cover the portion of your milk not covered by these programs. In fact you can only use LGM-Dairy or the MPP-Dairy program but not both. You can however use both traditional futures and options markets and the MPP program together. Your “historical” production data should come from your dairy, this amount will be the highest of your 2011, 2012, or 2013 production. This number will be used through 2018, with annual adjustments made for national production growth or contraction.

You can choose your production coverage level (25%-90%) and your margin protection level ( $4.00- $8.00). The chart below shows the premiums for different margin levels. One thing to note is that you can only select to cover your production at 1 margin level. In other words you cannot protect 25% of your production at $4.00 and 25% at $6.00. For a producer who produces over 4 million pounds there are 2 different premium levels, but the first 4 million pounds covered will be at the lower premium regardless of how much milk you market.

The margin prices are calculated monthly using national data and are not based directly on an individual farms actual margins. Possible payments will be based on a 2 month average (Jan-Feb, Mar-Apr, etc.) and most payments are expected to be processed approximately 30 days after the end of each 2 month period.

Each farm will need to sign up at their local Farm Service Agency Office. For more information contact your local FSA or Extension office. There are also some online resources at www.futurefordairy.com and http://www.fsa.usda.gov/FSA/pages/content/farmBill/fb_MPPDTool.jsp.

Premiums for Different Margin Levels

Premiums for Different Margin Levels

 

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