MIlk swirl
March 7, 2017

National Milk Proposes Changes to Dairy Margin Protection Program

 |  By: Jim Dickrell

Citing a drop-off in participation in the Dairy Margin Protection Program, the National Milk Producers Federation (NMPF) has proposed seven changes to the program that could make the program more palatable to dairy farmers across the country.

“Improving the MPP to make it a more realistic, effective safety net is a key focus for our membership in 2017,” said NMPF Chairman Randy Mooney. “For dairy farmers to have confidence in the MPP, we need Congress to make these corrections as soon as possible.”

Left unsaid is what the budget implications are for most of the changes being proposed. Many of the changes Congress made to the MPP from NMPF’s original Foundation for the Future plan were that the costs would exceed the $50 million annual baseline.

NMPF’s suggested changes include:

Re-instate the original MPP feed cost formula. Says NMPF: “The current, diluted, MPP-Dairy feed cost formula understates the cost of feed to produce 100 pounds of milk, thereby overstating the milk price over feed cost margin, reducing program payments to producers.”

• Adjust premiums paid into the program for coverage above the basic, $4 margin level. Says NMPF: “The MPP’s original premiums were … developed on actuarial principles based on actual prices, feed costs and margins, and were fixed at a rate that reflected a particular period of time of higher feed cost and lower milk prices. For a program to protect farms during catastrophic times, the costs of participation must incentivize widespread use of the program rather than become too expensive.”

Determine and make MPP payments on monthly rather than a bi-monthly basis. Says NMPF: “During the farm bill deliberations, Congress determined that monthly payments would increase the cost of the program significantly – an assessment that has subsequently been proven wrong. NMPF’s analysis indicates that monthly calculations would have increased average payments by, at most, 2¢/cwt during 2000-2016, and thus would have little effect on program costs while making the program more effective and timely for participating producers.”

Improve data collection and use of alfalfa, corn and soybean meal prices. Says NMPF: “NASS prices reflect prices that corn farmers receive when they sell – not what dairy farmers actually pay for their feed…. The feed cost components of the formula should also reflect the cost paid by dairy farmers to purchase those feed components.”

In the case of soybean meal, NMPF is asking that a national average price be used rather than the reported price at Decatur, Ill. Says NMPF: “During the period January 2014-January 2017, the national average cost of soybean meal was $10.33 per ton higher on average than the cost at Decatur-Central Illinois…. As a result, margins are higher and payments to producers are lower under the current program than they would be if the feed cost formula used the national average cost of soybean meal.”

Re-evaluate and more accurately report all-mill and mailbox milk prices to better reflect actual on-farm milk prices. Says NMPF: “The monthly NASS all-milk price is used in the MPP-Dairy feed cost formula due to USDA’s clear preference for using NASS data and because it is reported on a timelier basis than the monthly AMS mailbox price. Although NMPF does not dispute that the all-milk price might currently be the best option to reflect the national average price of milk, further analysis must be undertaken to verify the validity of the all-milk price.”

Provide dairy farmers greater flexibility for signing up for coverage for the upcoming year. Says NMPF: “The intent of Congress was to ensure that producers would not be able to game the program by having detailed market information for the coming year…. Actual experience with the program’s operations to date clearly indicates that this concern is without merit. In reality, producers having more futures market information helps them make more informed decisions.”

• Expand the cap and compatibility of the Livestock Gross Margin program with MPP. Says NMPF:Congress decided that producers who participate in the MPP cannot utilize the LGM program for the balance of the farm bill’s life. This has created a disadvantage for dairy farmers compared to other sectors of commodity agriculture who have more federal agricultural policy tools at their disposal.”

Read the entire NMPF press release here with its link to more details on the proposed changes.