Early next year Congress will take up reauthorization of the Farm Bill reauthorization. This bill, up for renewal every five years, is one of the most comprehensive pieces of legislation with which Congress deals and is of great importance. It impacts everything from commodity payment mechanisms and crop insurance to trade, specialty crops and nutrition.
The 2014 Farm Bill included numerous programs which impact dairy farmers, including; the Margin Protection Program for Dairy (MPP), LGM-Livestock and the Dairy Product Donation Program (DPDP). The legislation also included the Environmental Quality Incentives program (EQIP) and additional conservation programs. This article will focus on the Margin Protection Program for dairy producers.
Congress mandated that the United States Department of Agriculture (USDA) implement a new margin protection program for dairy producers. The MPP is a voluntary program intended to provide milk producers with protection from low operating margins.
A key aspect of the MPP is creating a timely and transparent measure of an average dairy-production operating margin that is useful across all dairy regions. The MPP was passed as a replacement for the Milk Income Loss Contract (MILC) and is effective through December 31, 2018. The Margin Protection Program 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 hundredweight (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.
There continues to be calls from the dairy sector for adjustments to the program. For example, dairy interests in the Midwest are advocating that the MPP should allow for additional production history for a participating dairy when a family member joins or when an inter-generational transfers occurs.
During debate of the 2014 Farm Bill, the National Milk Producers Federation (NMPF) sought a number of changes to the dairy MPP. These policy recommendations ranged from changing the way dairy feed costs are calculated, to providing farmers greater flexibility in signing up for coverage and using other risk management tools.
While these and other recommendations from the NMPF were not adopted by Congress in 2014, dairy producers from every region of the United States are once again lobbying for these and other policy initiatives as Congress and the Administration fully engage on writing the next Farm Bill.
Fred Starzyk is a Co-Founder and Principal of Heartland Advocates, a government relations and strategic communications firm with offices in Washington, D.C. and St. Paul, MN.