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Launch of New Dairy Safety Net Caps 5-Year Effort by NMPF, Co-ops and Producers

September 11, 2014

A day that many in the industry had been anticipating for five years finally arrived August 28, when the Agriculture Department formally launched the new federal dairy safety net included in the 2014 farm bill. Now, it’s up to producers to get to know the plan, make their coverage decisions and sign up before the November 28 deadline.

The program, called the Margin Protection Program, or MPP, allows producers to protect their margin – the difference between the price of milk and the cost of feed – rather than supporting milk prices. Farmers will insure margins on a sliding scale, and must decide annually both how much of their milk production to cover and the level of margin they wish to protect.

NMPF developed the key elements of the plan after the catastrophic losses producers suffered in 2009 and again in 2012.

NMPF President and CEO Jim Mulhern called the launch of the new program a major step forward for the industry. “The Margin Protection Program is more flexible, comprehensive and equitable than any safety net program dairy farmers have had in the past,” Mulhern said. “It is truly risk management for the 21st century, and we strongly encourage farmers to invest in using it going forward.”

To help farmers familiarize themselves with the new program, NMPF has put summaries and other materials on its website and the related website, which is serving as a hub for information on the plan. Included are a spreadsheet with past trends in the margin and an online calculator that will allow farmers to enter their own pricing and production data to help them select insurance coverage levels. In addition, NMPF held a series of webinars on the new program.

Every farm producing milk commercially is eligible for the program. Sign-ups started at local Farm Service Agency offices September 2 and will continue for 13 weeks until Friday, Nov. 28. Farmers can register for coverage for the last four months of calendar year 2014, as well as for the entire year of 2015.

A $100 annual registration fee qualifies a farmer to receive free, basic margin insurance coverage. A premium is required at higher levels of margin coverage. Producers can cover from 25 percent to 90 percent of their production history in five percent increments and can insure their margin from $4 per hundredweight to $8 per hundredweight in 50-cent increments.

Premiums equal a producer’s production history, times the percentage of the production history they cover, multiplied by the premium rate for the level of coverage selected.

Initially, there are two options for paying premiums. Producers can either pay 100 percent at the time they sign up or they can pay 25 percent by February 1, 2015, and the remainder by June 1. NMPF is working with USDA to set up additional payment plans, including an option to pay through monthly milk check deductions.

In one important decision, USDA agreed with NMPF that lower premium rates will apply to the first 4 million pounds of annual production enrolled for every dairy operation. For 2014 and 2015, the lower rates on the first four million pounds of production will be further reduced by 25 percent.

Release of the new dairy program’s details capped five years of work by NMPF, the nation’s dairy cooperatives and other farm groups. “We applaud the U.S. Department of Agriculture on its hard work putting the final touches on the plan over the last six months,” said Mulhern.