April 13, 2018

The Time May Be Right For MPP

 |  By: Mike Opperman

Recent changes to the Margin Protection Program (MPP) make it more palatable, and potentially more profitable, for producers who sign up for the program. That's according to Peter Vitaliano, vice president, economic policy and market research with the National Milk Producers Federation (NMPF). "Farmers should take a very serious look at the program," he says. "The reduction in premiums is what makes the revised program worth looking at."

USDA had announced the new MPP programs rules for 2018 following revisions made in the Bipartisan Budget Act of 2018. Sign-up for the 2018 MPP program is ongoing at your local FSA office and runs through June 1.

Coverage premiums have been reduced from 47 cents per cwt to 14.2 cents, meaning it costs less for producers to take part in the program with, therefore, a greater chance of seeing a return. That paying in without getting anything out process is what made the original MPP process so frustrating for producers. 

The other aspect that makes the MPP program more attractive is the outlook for reduced milk prices and subsequent low margins. The margin for February is set at $6.88, meaning producers with coverage under the $7 level should receive a payout. Margins are projected to be under $8 through August, Vitaliano says. 

Recently Andy Novakovic, a Cornell University dairy economist and Mark Stephenson, a University of Wisconsin dairy economist provided advice to producers on when and if they should sign up to the program. Both Novakovic and Stephenson say there is no rush to sign-up, unless you’re in desperate need of cash flow. The longer you wait, the more information you’ll have. And because sign-up is retroactive to January 1, that information could mean dollars in your check book. “By June 1, we’ll have all the margins for January through April,” notes Stephenson. So you’ll know exactly what the best coverage level is for those months, plus futures markets will give you some clues as to what markets are doing moving forward.

Bottom line, given the changes to the program and milk price outlook, MPP probably looks better now than it ever has. "We're hoping that more producers will crunch the numbers and get involved," Vitaliano says. 

There are a couple of tools available for producers to determine if signing up to the MPP program would be good for their business. NMPF has a calculator  as does USDA