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:
- Establish your production history.
- Elect coverage for September to December 2014.
- Elect coverage for January to December 2015.
- 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.