Dairymen have until Nov. 20 to join Margin Protection Program

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Holstein dairy cows on pasture

COLUMBUS — Dairymen have until Nov. 20 to enroll in the federal Margin Protection Program for coverage in 2016. The original enrollment deadline of Sept. 30 was extended to Nov. 20 earlier this fall.

The Margin Protection Program is a voluntary dairy safety net program created by the 2014 farm bill that provides financial assistance to participating farmers when the margin — the difference between the U.S. All Milk Price and calculated feed costs — falls below the coverage level selected by the farmer.

What to select

Farmers can use an online tool developed by dairy economists at The Ohio State University to aid in their decision-making.

Cameron Thraen, emeritus professor, and John Newton, formerly a Ph.D. graduate student working with Thraen and now senior director of economic research with the National Milk Producers Federation, were on a national team that created an online decision tool in 2014.

The MPP online tool can be accessed on the following websites: fsa.usda.gov/mpptool, dairymarkets.org/MPP, and farmbilltoolbox.farmdoc.illinois.edu/.

The tool helps producers calculate total premium costs and administrative fees associated with the program, as well as forecast MPP payments that will be made during the coverage year and the total MPP benefit a producer can anticipate, Thraen said.

Recently the tool added an advanced feature, one that lets a dairy farmer use her or his own farm milk production, milk price, feed cost, and financial data to customize the decision framework and stress-test their dairy business. The feature can be found on the online decision tool in the upper left section.

Take your time

The more time producers have to make a decision on their participation level, the better they’ll be able to make the most informed choice, Thraen said.

“The dairy market is pretty volatile, so another week, gives more time for the online decision tool to track out the direction in which the margin (milk price versus cost to feed) will trend in 2016,” he said.

Thraen said it’s in a producer’s interest to wait as long as possible before he makes a decisions. “The more hard data producers have at their disposal, the better.”

2016 forecast

Currently the online decision tool forecast shows a margin for 2016 that will be above the long-term average, Thraen said, due to “very strong demand for cheese and butter here at home.”

Thraen cautioned, however, that world dairy markets are volatile, and “any decline in the U.S. All Milk Price in the coming weeks could send the dairy margin tumbling.

“Ohio dairy farmers need to monitor international dairy prices as well as the continued strength in U.S. domestic demand in the coming weeks.”

Thraen said there will be a critical period will be just prior to the decision deadline of Nov. 20.

About the program:

  • The Dairy Margin Protection Program offers dairy producers: (1) catastrophic coverage, at no cost to the producer, other than an annual $100 administrative fee; and (2) various levels of buy-up coverage.
  • Catastrophic coverage provides payments to participating producers when the national dairy production margin is less than $4 per hundredweight (cwt). The national dairy production margin is the difference between the all-milk price and average feed costs.
  • Producers may purchase buy-up coverage that provides payments when margins are between $4 and $8 per cwt.

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