More Than a Fourth of Dairy Farmers Still Have No Clue about the Margin Protection Program

Published on: 18:55PM Oct 06, 2014

My initial reaction to this low level of knowledge: Incredible.

A national survey that generated 669 dairy farmer responses from across the country suggests 28% have no knowledge about the dairy Margin Protection Program (MPP-dairy) that is part of the 2014 farm bill.

Nearly 40% of survey respondents with less than 100 cows say they have no knowledge, and roughly a quarter of respondents with 200 to 499 cows report no knowledge.

My initial reaction to this low level of knowledge: Incredible. I’m not sure how many barrels of ink Dairy Today and other magazines have used to print the details of the program, but it has to run into the semi-loads. Our online efforts have also been almost non-stop. Barely a week has gone by in the past year that we haven’t posted something to dairytoday.com.

At the same time, maybe it is understandable that a good chunk of dairy farmers have tuned out the farm bill. Remember, this was supposed to be the 2012 farm bill, but it dragged on seemingly forever. And the political fights—Democrats versus Republicans, co-ops versus processors, Midwest versus West Coast producers—were nasty and never ending.

The survey itself was conducted by the University of Minnesota (U of M) and Michigan State University (MSU), underwritten by a grant from USDA. The intent was to gauge dairy farmer understanding of the program as well as garner some early indication of farmer sign-up intention. It was conducted this past summer, using both mailed surveys and internet responses. (Dairy Today and other magazines promoted the survey online).

Dairy economists Marin Bozic and Fanda Yang with the U of M and Chris Wolf, with MSU, reached five major conclusions from the study:

• More than a third of herds with fewer than 100 cows view MPP-dairy unfavorably. The economists speculate that these smaller herds were receiving Milk Income Loss Contract benefits for free under the old farm bill, sometime receiving payments of $1 to even $2/cwt. With MPP-dairy, even the catastrophic $4 margin insurance will cost $100 per year, and higher levels of protection will require some payment premiums (albeit miniscule).

• More than 80% of the respondents say they would change their coverage levels annually, based on expected milk and feed prices for the coming year. This shouldn’t come as a surprise; Dairy Today got a similar response from large producers a year ago at our Elite Producer Business Conference. But this does suggest farmers view MPP-dairy as a way to maximize returns rather than mitigate risk.

• Forty percent of respondents indicate they would reduce their use of private risk management tools, such as forward contracts, hedging and options.

• Some economists suggest strong participation in the MPP-dairy could reduce net farm income volatility but also long-run average milk price. “Over 25% of dairy producers indicated they fear MPP-dairy may distort market signals to farmers, and an even larger faction would desire stronger government involvement through market stabilization instruments,” say Bozic, Wolf and Yang.

• Counter-intuitively, “it is still logical to conclude that the more concerns producers have about MPP-dairy, the less they would be willing to engage in major expansions—thus partially offsetting potentially distorting effects of MPP-dairy on average farm profitability,” say the economists.

Finally, for dairy farmers who still have questions about MPPC-dairy, the October issue of Dairy Today used more barrels of ink describing the program and offering premium calculation examples. It should be in your mailbox this week and our online version will be posted shortly.
Sign-up deadline for the rest of 2014 and all of 2015 is Nov. 28.

Educational videos on MPP-dairy can be found here.

Full survey results can be found here.