MILC Payments

The Milk Income Loss Contract (MILC) program began with the 2002 Farm Bill. It was designed to replace the money lost to New England farmers when Congress declined to renew authorization for the Northeast Dairy Compact.

Payments have been triggered when the Class I price in Boston has fallen below $16.94 per cwt. (the old Compact Class I price). Currently, the base payment rate is any positive difference between $16.94 and the Class I milk price at Boston, times 45%. (This 45% is the share of Class I milk in the New England market that lost the Compact premium.)

There is also a “feed cost adjustor,” which can only increase the payment. When the price of a cwt. of dairy feed rises, say, 10% above its target of $7.35/cwt., the $16.94 target for Boston’s Class I price is adjusted up by 10% x 45% = 4.5%. (This 45% is feed’s rough share of milk costs.) This raised the target in earlier months, but is not now projected to increase any actual payments.

Payments under the program are limited by production: currently, producers are eligible to receive payments on up to 2.985 million pounds per fiscal year. Larger producers can choose the month for which they want to start receiving payments; after that, they receive payments for all months until they reach their cap. Months with no payment don’t count.

Both the projected Class I milk price and the projected feed costs are down from last month, but once again, only very small MILC payments are projected during the current fiscal year. Current projections have the Class I price very close to the MILC target rate from February through July. This means that small shifts in these projected milk or feed cost could easily lead to payments in all of these months or none of these months.

For the first time this fiscal year, we are projecting a payment in the next eligible payment month, but a very small one. A month with no payment does not count against the volume cap, but a month with even a very small payment does.

Note that February through September is only 8 months, so that a producer would have to produce more than 2,985,000 pounds in those 8 months to reach the payment cap, even if there were payments in every month until then.

 

MILC Payment Rates and Projections
Year Boston Class I Payment
Actual Target Rate
       
FY 2012      
October '11
 22.81 20.64 0.0000
November
 21.70
 20.66 0.0000
December 21.72 20.22 0.0000
January '12 22.05 21.02 0.0000
February 20.91 20.95 0.0195
March 20.74 20.90 0.0713
April 21.07 20.94 0.0000
May 21.11 20.93 0.0000
June 20.98 20.98 0.0000
July 20.92 20.97 0.0256
August 20.89 20.46 0.0000
September 20.89 17.91 0.0000
       

Projected from futures as of 1/10/12

 

 

MILC target adjusted for feed costs, per 2008 Farm Bill; projected from futures prices as of 1/10/12.

 

 

NMPF Addresses Producer Confusion about MILC Eligibility Regarding Adjusted Gross Income - June 18, 2009

Some producers were misinformed about their eligibility for the Milk Income Loss Contract (MILC) program, with respect to Adjusted Gross Income (AGI).

The MILC payments are limited to producers with nonfarm AGI below $500,000.

However, for the MILC program, there is no limit with respect to farm AGI. Please also note that farm AGI was redefined last year to include many farm-related enterprises (www.fsa.usda.gov/Internet/FSA_File/agi2009.pdf).

A careful reading of the form CCC-926, the “Statement of Adjusted Gross Income”, required for these payments makes this clear:

“For commodity, price support benefits, disaster assistance programs, and for the Milk Income Loss Compensation Program, if the person or legal entity has:

  • “average adjusted gross nonfarm income greater than $500,000, the person or legal entity is not eligible for payments and benefits from these programs.

  • “average adjusted gross farm income greater than $750,000, the person or legal entity is not eligible for direct payments under the Direct and Countercyclical Program.” This does not apply to the MILC payment.

The CCC-296 form can be found at the following USDA link: forms.sc.egov.usda.gov/efcommon/eFileServices/Forms/CCC0926_081120V01.pdf.

 

NMPF Urges FSA to Clarify MILC Rules, Resolve Errors in Implementation - January 9, 2009

In a January 9, 2009 letter to the USDA Farm Service Agency (FSA), NMPF asked FSA Administrator Teresa Lasseter to clarify key points regarding the MILC, including producer-selected payment start dates and eligibility limits on total or farm-based Adjusted Gross Income (AGI). NMPF also urged FSA to work harder to facilitate producers’ timely applications, in response to reports of some offices’ unnecessarily rigid enforcement of paperwork requirements.

The full letter is available here.