Recent feed and milk prices point to a small pay-out under the new farm bill program.
The average actual dairy production margin for January and February fell below $8 per cwt., meaning those who hold $8 coverage levels under the Margin Protection Program for Dairy (MPP) will receive a payment for the first time since the program was implemented late last year.
Component prices for corn, alfalfa hay, soybean meal and all milk under the MPP were released recently by USDA’s Farm Service Agency (FSA).
According to Dairy Farmers of America’s April 3 daily e-newsletter, February’s prices were reported at:
- Corn - $3.79 per bu.
- Alfalfa hay - $172 per ton
- Soybean meal - $370.38 per ton
- All-Milk price - $16.80 per cwt.
The milk-feed margin for February amounted to $7.6554 per cwt. Combined with the January milk-feed margin of $8.3356 per cwt., the average actual dairy production margin for the consecutive two-month period of January and February is $7.9955. As a result, FSA has confirmed a payment will go to producers who elected the $8 coverage level.
Even so, the MPP’s first pay-out won’t make much of a dent for dairies, reports AgDairy Market’s Robin Schmahl, a commodity and dairy trader.
“The payment will only amount to pocket change, even for a large dairy,” Schmahl, says. “It will cost the government more for postage than the payment.”
Schmahl thought USDA would send the payments by the middle of the following month, but he’s not sure if anyone knows. “In fact, I do not even know how they will be able to pay in tenths of a cent unless they do some rounding of payments,” he says.
[Update: FSA’s Danielle Cooke confirmed April 7 that “payments are expected this month.”]
For operations that have not fully paid their 2015 MPP program premium, a MPP payment will be dispersed only after deductions are made for the outstanding premium, DFA reminds its members.
Click here for a link from FSA helps dairy producers keep track of the income over feed cost on a monthly basis.
The MPP replaces the Milk Income Loss Contract Program (MILC). The MPP remains in effect through December 31, 2018. It offers dairy producers:
(1) Catastrophic coverage, at no cost to the producer, other than an annual $100 administrative fee; and
(2) Various levels of buy-up coverage.
Catastrophic coverage provides payments to participating producers when the national dairy production margin is less than $4.00 per cwt. The national dairy production margin is the difference between the All-Milk price and average feed costs. Producers may purchase buy-up coverage that provides payments when margins are between $4.00 and $8.00 per cwt. To participate in buy-up coverage, a producer must pay a premium that varies with the level of protection the producer elects.