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June 15, 2018

​​​​​​​USDA Can’t Give Dairy Dollars Away

 |  By: Dairy Talk

The United States Department of Agriculture (USDA) has again extended sign-up for the 2018 Dairy Margin Protection Program (MPP).


It’s almost as though USDA can’t give money away. The cynicism of some dairy farmers has become their own worst enemy.


Some 20,000 dairy farmers had signed up for the program by June 1. At the urging of a number of U.S. Senators, all from key dairy states, USDA agreed to extend the deadline a week, and about 500 more farmers signed up. But that left some 18,000 who hadn’t made the pilgrimage to their Farm Service Agency office. So USDA has extended the deadline again—this time to June 22. 


What’s so odd is that the sign-up is retroactive to January 1. Farmers are already guaranteed indemnities of $1.12/cwt for February, $1.23 for March and $1.38 for April on their first 416,667 lb of production each month (Tier 1 farms are capped at 5 million pounds annually). All this for a premium of 14.2¢/cwt. Based on current futures market prices, the milk/feed margin will remain below $8—and thus pay an indemnity—through July.


Marin Bozic, a University of Minnesota dairy economist, estimated net MPP payments for 2018 based on $8 coverage. This isn’t chump change.


5,000,000 lb                                     $16,126

4,000,000 lb                                     $12,883

3,000,000 lb                                     $9,695

2,000,000 lb                                     $6,395

1,000,000 lb                                     $3,150


This year, Dairy MPP is the gift that keeps on giving. But nearly half of U.S. dairy farmers refuse to open the present. In a stunningly candid conversation with U.S. Farm Report’s Tyne Morgan, Con. Collin Peterson (D., Minn.), the ranking member of the House Ag Committee, admitted that MPP is a program that probably can’t be fixed. Many farmers have become so disillusioned with and cynical of the program that they refuse to participate – even when payouts are guaranteed.


Image Problem. The Senate version of the 2018 Farm Bill acknowledges the image problem with MPP, and goes so far as to rename (rebrand) the program “Dairy Risk Coverage.” The Senate version would increase coverage to a $9 milk/feed margin. And, it would further discount premiums by 50% for farmers with production up to 2 million lb annually, and 25% for farmers with annual production of 2 to 10 million lb.  Given recent history, even that probably won’t be enough to entice the cynics.


All of this is being done in an election year—and under Republican control of Congress. The deficit hawks of previous Congresses have become storks delivering bundles of cash to farmers. But a good portion of famers don’t want their nests fowled. I’m not sure whether we should laud their character—or question their sanity.