By Nathan J. Hulinsky
MPP
Dairy Margin Protection Program (MPP) was enacted in the Agricultural Act of 2014 (2014 Farm Bill). The program was an insurance mechanism for dairy producers to protect milk price/feed cost margin by selecting a coverage level from $4.00 to $8.00/cwt. Also producers need to select coverage percentage between 25% and 90% of annual pounds produced. The program initially had mixed results with most farmers only receiving enough payments to cover their enrolment fees. In April 2018 The Bipartisan Act of 2018 was passed, making changes to the MPP payment structure, resulting in better benefits to most dairy farmers.
Changes to MPP
- Calculations are monthly, instead of bi-monthly of margins.
- Pounds of milk covered increased in Tier 1 to 5 million pounds/year, from 4.
- Premium rates reduced significantly.
- Certain groups, beginning, limited resource, disadvantaged, or military veteran farmers may qualify for administrative fees.
- Must re-enroll by June 1, 2018.
Payment Structure
Table 1 shows the dollar amount per hundred weight for the different coverage levels. Tier 1 has been changed from 4 Million pounds to 5 Million pounds and the premiums have been reduced.
Table 2 shows the expected returns based on 1 Million or 3 Million pounds of milk sold annually and based on either 70% or 90% covered. One can see from the table that the $8.00 and $7.50 coverage level at either 70% or 90% has a positive expected return for both 1 Million and 3 Million pounds.
The chart below shows the same information as Table 2. For the 1 Million and 3 Million pounds producers has a positive Expected Return at 70% and 90%.
To be Eligible
- Produce and commercially market milk from cows located in the United States.
- Provide proof of milk production at the time of registration.
- Not be enrolled in the Risk Management Agency's Livestock Gross Margin for Dairy program (LGM-Dairy).