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MPP/DMC Forecast: February 2019

January 18, 2019

The monthly margin under the dairy Margin Protection Program (MPP) for November 2018 was slated to be announced on Dec. 31, but the current government shutdown has stalled the announcement and any announcement of the prices used to calculate it. The Agriculture Department’s (USDA) online MPP Decision Tool has projected it at $8.15/cwt., which would be $0.81/cwt. lower than the October margin, but high enough to not trigger any payments under the 2018 program provisions.

The Agriculture Improvement Act of 2018, the farm bill enacted into law late last month, makes significant changes to the MPP, including renaming it the Dairy Margin Coverage (DMC) program. Those changes took effect on Jan. 1.  The MPP continued in effect until then, including the eventual announcement of last year’s margins for November and December, neither of which is likely to generate any payments under the applicable MPP rules – although December’s margin is likely to be close to $8.00, a coverage level at which thousands of dairy farmers are enrolled for coverage.

The new DMC program rules do not change the calculation of the margin. The Decision Tool’s margin forecasts, based on the Jan. 2 CME dairy futures settlement prices are shown in the accompanying chart. However, DMC rules permit producers to enroll for coverage at a margin of up to $9.50/cwt. The current USDA forecast shows the margin remaining under this level for the first 10 months of 2019, which makes signing up at the new, higher maximum coverage level a viable option for many dairy producers next year. No date has yet been set for USDA to announce the sign-up period for DMC coverage in 2019.

The new farm bill also removes the previous restriction that prohibited producers from enrolling milk in both the margin program and the Livestock Gross Margin (LGM-Dairy) program during the same month. It further allows farmers who were previously prevented from enrolling in MPP during 2018 due to this restriction to enroll retroactively in MPP and collect payments for 2018 for the months during which they were prevented from doing so.

USDA’s MPP margin forecasts can be accessed online.