WOOSTER, Ohio — Sign-up for the long-awaited Dairy Margin Protection program begins Sept. 2.
The program, created by the 2014 farm bill, helps protect dairy farmers against losses when the difference between the cost of feed and the cost of milk sold becomes too tight.
U.S. Secretary of Agriculture Tom Vilsack released details Aug. 28.
The program guarantees a margin protection of at least $4 per hundred pounds of milk produced, and producers can pay more to achieve more coverage, up to $8 per hundred pounds.
Producers can also decide what percent of their total milk production they want to protect, from 25 percent to 90 percent.
In a call with reporters, Vilsack said dairy prices are good now, but reminded everyone that dairy prices can change quickly.
At the end of the last decade, for example, prices went from record highs, to record lows, and became the catalyst for new dairy policy to help stabilize the market.
“You really have to supply some kind of insurance protection,” he said.
Vilsack was joined on the call by U.S. Sen. Patrick Leahy, D-Vt., a proponent of margin protection.
“Dairy prices are very high right now,” Leahy said. “They’re comfortable. … But you only have to have about a 1 or a 1.5 percent surplus and every dairy farmer knows that can go into a tailspin.”
The last major tailspin was in 2009, when the price for 100 pounds of milk dipped below $10 — about half the price of a year or two earlier. Many dairy farms went out of business, and those that remained took on new debt and financial burden.
The notion of a margin protection program was met with criticism during the farm bill debates, as some House Republicans argued earlier versions of the bill amounted to supply management.
The current program is voluntary and allows producers to choose the level they want to participate, which helped the program win additional support.
To participate, a dairy farmer must sign up during the sign-up window for each year, and pay a $100 fee each year. This year’s window runs Sept. 2-Nov. 28.
Farmers can register for coverage for the last four months of 2014, as well as for the entire year of 2015.
Basic coverage, at a margin of $4 per hundredweight, is offered at no cost. Above the $4 margin level, coverage is available in 50-cent increments, up to $8 per cwt. Premiums are fixed for five years, but will be discounted by 25 percent in 2014 and 2015, for annual farm production volumes up to 4 million pounds, according to the National Milk Producers Federation.
Premiums are higher at production levels above 4 million pounds.
Leahy said it was important to protect family operations and to avoid giving large farms “a ticket to overproduction.” This is why premiums are higher above the 4 million-pound production level.
Farmers must also show the previous three years of milk production and the highest year, to accurately show how much they’re producing.
“It (the program) protects farmers who are really looking for protection to continue the basic dairy production they have,” he said.
The USDA also launched a new Internet tool to help producers determine the level of coverage that will provide them with the strongest safety net under a variety of conditions. The online resource is available at www.fsa.usda.gov/mpptool.
Leahy said it makes good sense to at least sign up for the basic protection, but producers may want to insure more, depending on their operation.
For $100, it is a great investment,” he said. “This is a chance to try and stop the boom or bust situation.”
The National Milk Producers Federation, strong supporters of the program, had worked on margin protection for about five years.
“The new Margin Protection Program is more flexible, comprehensive and equitable than any safety net program dairy farmers have had in the past,” said Jim Mulhern, president and CEO of NMPF. “It is risk management for the 21st century, and we strongly encourage farmers to invest in using it going forward.”
The program replaces the Milk Income Loss Contract program (known as MILC) and includes some restrictions.
For instance, dairy farms enrolling for margin protection must comply with conservation compliance provisions and cannot also participate in the Livestock Gross Margin dairy insurance program.
Farmers already participating in the Livestock Gross Margin program may register for the Margin Protection Program, but the new margin program will only begin once their Livestock Gross Margin coverage has ended.
The 2014 farm bill also established the Dairy Product Donation Program. This program authorizes USDA to purchase and donate dairy products to nonprofit organizations that provide nutrition assistance to low-income families.
Purchases only occur during periods of low dairy margins and dairy operators do not need to enroll to benefit from the donation program.
“In the event you see prices come down because of oversupply, you also have to have a process by which you deal with that oversupply,” Vilsack said.
In the meantime, Vilsack said it’s important to remain “robustly engaged,” to maintain domestic and international demand and keep milk prices from coming down in the first place.
• The Dairy Margin Protection Program is a new form of voluntary margin insurance for dairy farmers, authorized by the 2014 farm bill. The program allows farmers to insure their production and a cost-of production margin from $4-$8 per 100 pounds of milk.
• Ohio State University Extension has scheduled three regional meetings to explain the program. The first meeting was held Sept. 3 in Auglaize County. A second meeting will be held Sept. 11 at the Mahoning County Experimental Farm. And the final meeting will be held Sept. 15 at the OARDC Shisler Center, in Wooster. The meetings run from 9:30 a.m.-3 p.m., and you should register with either the Mahoning or Wayne County OSU Extension.
• To learn more or to sign up for margin protection, visit FSA online at www.fsa.usda.gov/factsheets, or visit your local FSA office.
• USDA has also developed an Internet tool to help producers determine the level of coverage that will provide them with the strongest safety net under a variety of conditions. The tool is available at www.fsa.usda.gov/mpptool.