The following is from USDA Farm Service Agency:
The 2014 Farm Bill authorizes a new dairy program, the Margin Protection Program for Dairy Producers (MPP-Dairy), which will replace the Milk Income Loss Contract (MILC) program no later than September 1, 2014. The MPP-Dairy program is a voluntary program that provides dairy operations with risk management coverage that will compensate producers when the difference between the all-milk price and the average cost of feed falls below a certain level selected by the producers in a dairy operation.
Eligible producers can obtain either a catastrophic level of coverage for their dairy operation by paying a $100 administrative fee annually or they may obtain increased coverage at various levels by paying a premium in addition to the administrative fee. Available price coverage levels begin at $4.00 and coverage may be increased in $.50 increments through $8.00 per hundredweight. Available coverage percentages begin at 25 percent and coverage may be increased in 5 percent increments through 90 percent. A dairy operation’s selection of a $4.00 coverage level with a coverage percentage of 90 is considered the catastrophic level of coverage. Indemnity payments under the program will be triggered when margins fall below the producer-selected levels.
Producers may choose to participate in either the MPP-Dairy program which will be administered by the Farm Service Agency or the Livestock Gross Margin (LGM-Dairy) program currently administered by the Risk Management Agency (RMA) as the 2014 Farm Bill specifically provides that a dairy operation may not participate in both programs to earn multiple benefits.
Dairy operations who are currently participating in RMA’s LGM-Dairy insurance program with target marketings insured into 2015 may transition to the MPP-Dairy program by registering for MPP-Dairy and completing the LGM-Dairy active target marketings to conclude the producer’s coverage. Because MPP-Dairy utilizes a consecutive 2-month cycle for which to evaluate prices, some LGM-Dairy participants may have an interruption of coverage depending on which month their LGM-Dairy active target marketings concludes. A two-month MPP-Dairy cycle cannot be split to begin the MPP-Dairy contract; therefore, the dairy producer would transition into a MPP-Dairy contract the first month of the next available two-month cycle following completion of the active target marketings month.
Producers will establish their production history upon their initial registration for the MPP-Dairy program based on the highest annual milk production marketed during the full calendar years of 2011, 2012 or 2013. New dairy operations with less than a year of milk marketings will either have their production history established by extrapolating their available milk marketings to a yearly quantity or estimated based on heard size relative to the national rolling herd average.
This information is being provided in advance for planning purposes only as regulations for the MPP-Dairy program are still being developed. Producers can prepare for the program by assembling their milk marketings for the 2011, 2012 and 2013 calendar years. Sometime in September 2014 a decision tool will be made available to help make coverage level decisions. FSA will announce an enrollment period for the 2014 and/or 2015 MPP-Dairy program in the fall of 2014.
Additional information and details about MPP-Dairy will be made available at a later date.