It's been so long since USDA sent out Milk Income Loss Contract (MILC) payments (February 2007), you might have forgotten about the program.
Sign-up for the new and improved program actually began December 22. There are a few new twists to the program.
The new annual production limit is 2.985 million lb. of milk, at least through August 31, 2012. The MILC payment will be paid on 45% of the difference between the Class I price in Boston and $16.94. (That is a reversion to the payment rate of the original program, compliments of the 2008 Farm Bill. It had been scaled back to 34% in 2006, 2007 and 2008 as a cost-saving measure.)
Also new is a National Average Dairy Feed Ration Adjustment (NADFR), which will be calculated using corn, soybean and alfalfa to make up a 16% protein dairy feed. The prices used in the calculation will be posted each month by USDA's National Agricultural Statistics Service.
If feed prices exceed $7.35/cwt, the $16.94 trigger price will be adjusted upward by the percentage that the feed price exceeds $7.35. In USDA's hypothetical example, the feed price was assumed to be $10.05/cwt. This exceeds the $7.35 trigger feed price by 36.73%. That percentage is then multiplied by 45% which is then multiplied by $16.94. The result, $2.80, is then added to the $16.94 Boston Class I trigger to come up with a new trigger price of $19.74/cwt.
If the actual Boston price is $18, the MILC payment is calculated by subtracting $18 from $19.74 times 45% to come up with a payment of 78.3¢/cwt. I know it's confusing. But without the feed adjustor, there would have been no payment since $18 is higher than $16.94.
(I also plugged in actual feed prices for October and preliminary feed prices for November. Even though the feed prices in those months were higher than $7.35--$8.80 in October and $8.10 in November, neither would have been high enough to trigger an MILC payment. The reason: The Class I price in Boston was still higher than the adjusted price.)
The new MILC program also has a new Adjusted Gross Income limitation of $500,000. If your non-farm income exceeds $500,000, you are not eligible for the MILC payment. While few dairy producers I know hit that trigger, it's one more form you'll be required to fill out.
Based on the futures market (and not factoring in the feed adjustment trigger), the biggest MILC payments could come in the first quarter this year. You have until January 21 to sign up for payments starting this January, or for later months, until the 14th of the month before the selected MILC production start month.
So if you're a large producer, with multiples of 150 cows, you might want to apply soon to get the highest payments possible.
For more information on the MILC program, go to: www.fsa.usda.gov, and click on Price Support. Or, visit your friendly, local FSA office. Good luck milking the program. This year, you're gonna need it.
--Jim Dickrell is editor of Dairy Today. You can reach him via e-mail at email@example.com.
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