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What is The Dairy Producer Margin Program

by Mike Austin

Well it looks like we have ourselves a new long term farm bill. The Agricultural Act of 2014 has made its way through the House... and with the Senate expected to pass the bill next week and the President eager to sign it.... the three year saga of passing new farm legislation looks to be complete. Now several provisions in the new bill are different than what was passed in the House and Senate...and that includes dairy. David Cooper of Farm First Dairy shared with me some of what he sees are the highlights of the Dairy Producer Margin Protection Program   First of all the program supports margins, not prices and is meant to address both catastrophic conditions as well as prolonged periods of low margins. Under the program the margin is the all milk price minus the average feed price as determined by the USDA. Some of the key elements of the program are 

All dairy operations are eligible to participate in the program. If a dairy producer operates multiple farms, each operation must be registered separately to participate.

Coverage will be limited to the volume of milk equivalent to the producers production history (to start that will be the highest annual level of production during 2011, 2012, or 2013.)

In 5% increments...producers will be able to protect from 25-90% of their production history

Producers will be able to select margin protection coverage at 50 cent increments beginning at $4.00 per cwt. through $8.00 cwt. Premiums will be fixed for 5 years.

Payments will be made when margins fall below $4 (or below the selected coverage level the producer choose above $4) for two consecutive months.

Dairy producers will pay an annual fee of $100.00 in order to access the Margin Protection program.

The program must be initiated by September 1st, 2014.

Also as a part of the new dairy legislation a new Dairy Product Donation program has been created that would be triggered if the margin falls below $4 per cwt. for two consecutive months. If that happens, the USDA would purchase dairy products for three consecutive months or until the margin goes back above $4.00 per cwt.  The purchased product would be donated as part of the assistance nutrition program.

The passage of the Margin Protection Program would also mean the end of the dairy product price support program and the dairy export incentive program and as soon as the program begins in September, that would be the end of the MILC program.  

As you can see this is quite a change in the direction of federal dairy policy.