By Severson, Dan
Dairy farmers who qualified for a small Margin Protection Program for Dairy (MPP-Dairy) payment will get a little something extra – a civics lesson. That’s because when USDA’s Farm Service Agency (FSA) announced the payments for the January-February 2015 period, it included a reminder those payments are subject to budget sequestration, or a reduction of 7.3%.
In an Information Letter Series posted on the Dairy Markets and Policy website this week, Andrew M. Novakovic, University of Cornell dairy economist (a.k.a. civics teacher), reminded everyone of the origin of across-the-board sequestration that took effect Oct. 1, 2014. The letter, “Sequestration of USDA Expenditures in Fiscal Year 2015,” explains the process, and why it is in place now.
First, the numbers: Looking at the January-February 2015 MPP-Dairy pay period, any producer who insured a margin of $8.00/cwt. will receive a payment of $0.004456/cwt. on the portion of their milk production history they elected to cover. That’s not 45¢ per hundredweight, or 4.5¢ per hundredweight, but 0.4456¢ (45 hundredths of 1¢) – less than half of Abe Lincoln’s copper head per hundredweight.
According to USDA analysis, 261 dairy producers insured about 58% of their 1 billion lbs. of milk at the $8/cwt. level. Under the MPP-Dairy program, the eligible milk production history for these producers (about 1 billion lbs. X 58% = 583 million lbs.) is divided equally over six 2-month pay periods, making 97.2 million lbs. (972,000 hundredweights) eligible for the 0.4456¢/cwt. payment for the January-February pay period. That adds up to about $4,330 in total payments – divided by 261 producers nationally – for this pay period.
Novakovic estimated a dairy farmer insuring 4 million lbs. of milk annually at the $8.00/cwt. margin level would have received $29.73 this pay period. With the largely forgotten budget reduction maneuver – sequestration – the payment is reduced $2.17, to $27.56.
Source:udel.edu