To Enroll or Not to Enroll in the MPP?

November 25, 2014 10:33 AM
 
To Enroll or Not to Enroll in the MPP?

A Cornell University economist offers thoughts to help dairy producers make up their minds about the Margin Protection  Program. 

Have you signed up for the Margin Protection Program (MPP)? Will you?  Should you?   

Whether  or  not  a  farmer  chooses  to  participate  in  the  new  margin  insurance  program  is,  of  course,  entirely  up  to  him  or  her, says Andrew Novakovic, professor of agricultural economics at Cornell University. But, aware that many producers are still grappling with the decision, Novakovic has put together ideas to help dairy producers make up their minds. 

The last day to enroll in  the  new  MPP is Dec. 5. During  this  first  enrollment  period,  farmers  may  do  one  or  more  of  four  things, Novakovic says:

  1. Establish your production history.
  2. Elect coverage for September to December 2014.
  3. Elect coverage for January to December 2015.
  4. Skip the MPP until  next  year,  later,  or  altogether.

Producers should note they can  separately  elect  to  participate  in  the  last  two  bi-­monthly  periods  of  2014,  the  entire  calendar  year  2015,  or  postpone  participation  to  2016,  2017 or  2018, Novakovic notes.   

“However,  once  an  operation  is enrolled,  it  is committed  to  elect  at  least  the  minimal, catastrophic  coverage  for  future  years,” he says. “If  she  elects  coverage  for  2014,  she  is  committed  through  2018.    If  she  elects  coverage  first  in  2015,  she  skips  2014  but  is  committed  to  2016,  2017  and  2018.”   

A farmer can postpone participation as long as he or she wants. “Of course, he can choose to never participate,” says Novakovic.

“Word  of  mouth  information  suggests  that  the  enrollment  so  far  has  been  light,” he adds. “Many  people  who  are  following  this  new  program  anticipated  that  farmers  would  wait  until  the  end  to  make  their  decisions. Part of the  reason  for  this  is  just  normal  procrastination, but  it  is  also the  case  that  farmers  are  busy  being  farmers  in  the  Fall  and  the  participation  decision  is  a  bit  complex. Still, push is coming to shove.  In between deer hunting, football, Mom’s delicious Thanksgiving dinner, and Christmas shopping, many dairy farm families will be wrestling with the decision that week after Thanksgiving.”

Read Novakovic’s analysis here.

The MPP is a new program authorized under the Agricultural Act of 2014. Under this program, dairy farmers can purchase varying levels of "margin insurance" that will provide them with compensating payments if a new national indicator of milk income over feed costs, called the Actual Dairy Producer Margin, falls below the threshold coverage elected annually by a dairy farm operation. Additional details on MPP-Dairy are available in DMAP IL14-01 and other educational materials posted on www.dairymarkets.org/MPP.

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