National Milk Producers Federation

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.

Projected MILC payments are up for the six months beginning with April 2011, projected to average 22¢ per cwt. This is based primarily on rising feed cost projections, and projects to about $120 million in MILC payments for FY 2011.

Fiscal Year 2010 ends September 30. MILC payments are limited to 2,985,000 pounds of milk per operation per fiscal year. For producers large enough to worry about this limit, their deadline to choose their start month for FY 2011 is coming up.

The highest payments for FY 2010 were in October, so most capped producers chose October as their start date last year. Any farmer who wants to change that for FY 2011 will have to file a new start date with the Farm Service Agency (FSA) by September 14. Months with no payment rate don’t count against the cap, but if October is your start month, payments will begin with the first month for which there is a payment rate.

However, this does not have to be a final decision. Producers can change their start date as often as they’d like, as long as they do so by the 14th of a month that is before both the start month on file and the start month they want to change to.

For example, a farmer can go to the FSA office by September 14, and choose May 2011 as his start month for FY 2011. Then, if the markets shift, and it looks like he can get larger payments by starting with March, he can change to March, as long as he does so by February 14. If he wants to change to July, he must do so by April 14.

For more information, see the materials on USDA’s MILC page, including the fact sheet.

MILC target price adjusted for feed costs, per 2008 Farm Bill; projections from futures prices as of 8/30/10

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 (http://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: http://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.