January 29, 2019

How Big Will Your MPP Refund Be?

 |  By: Anna-Lisa Laca

Under the 2018 farm bill, dairy producers will receive a refund up to 75% of Margin Protection Program (MPP) premiums paid from 2014 to 2017, excluding administrative fees.


“Due to the low frequency of program payments, total program payments made to dairy farmers during this time are estimated at less than $12 million – resulting in an aggregate loss ratio of less than one-sixth of 1%,” says John Newton, chief economist at American Farm Bureau Federation. He adds that farmers will receive a refund of up to 75% of premiums. “Based on estimates of premiums paid into the program and program payments, up to $60 million dollars are likely eligible for premium refunds.


Premiums paid for 2018 coverage – post-Bipartisan Budget Act improvements – are nonrefundable.


The premium repayments will be distributed in one of two ways: a farmer can receive 50% of the repayment as a direct cash repayment, or a farmer can receive 75% of the repayment as a credit toward Dairy Margin Coverage for the 2019 to 2023 coverage years, Newton explains.


He encourages producers to consider the total amount of the potential refund compared to the cost of DMC coverage over the five-year life of the farm bill.


“Given the ongoing financial pain that producers have endured, we request that you promptly

inform all producers of the amounts they would be entitled to under both the credit option and the refund option, to best enable them to make decisions in a timely manner,” Jim Mulhern, CEO of National Milk Producers Federation wrote in a letter to Agriculture Secretary Sonny Perdue last week. “Should producers select the refund option, we urge you to direct FSA offices to ensure prompt delivery of these payments.”


NMPF is asking USDA for clarification on what happens to those producers who select the credit and the amount of the credit exceeds the producer’s required premium payment for 2019. They would like to see USDA allow the rest of the credit applied toward future years’ premiums.


“If a dairy operation closes at any point but still has some of the credit outstanding, we urge that the owner be able to receive a direct refund at that point,” he wrote.


Which refund option will you choose? Let us know in the comments or email me at alaca[email protected].