U.S. Agriculture Secretary Sonny Perdue has approved a one-week extension for producers to sign up for the Margin Protection Program for Dairy (MPP-Dairy). Producers now have until June 8 to enroll in MPP-Dairy for 2018; the original deadline was June 1.
Read also: MPP-Dairy: The deadline is now; payments already guaranteed for February through April and MPP-Dairy check processing to start June 4
Last week, 16 U.S. senators had asked Perdue for a 30-day extension, saying many dairy farmers were too busy with weather-delayed spring planting and needed more time to evaluate the economic benefits of changes made to MPP-Dairy earlier this year in the Bipartisan Budget Act.
Signing the letter to Perdue were Democratic U.S. Sens. Amy Klobuchar and Tina Smith of Minnesota; Tammy Baldwin of Wisconsin; Debbie Stabenow of Michigan; Sherrod Brown of Ohio; Bob Casey of Pennsylvania; Kirsten Gillibrand and Chuck Schumer of New York; Patrick Leahy of Vermont; Jack Reed and Sheldon Whitehouse of Rhode Island; Bernie Sanders of Vermont; and Ron Wyden of Oregon. Also signing the letter were Republican Sens. Rob Portman of Ohio and Joni Ernst of Iowa, and Independent Sen. Angus King of Maine.
Payment processing already underway
The USDA’s Farm Service Agency was scheduled to begin processing MPP-Dairy payments for participating dairy farmers on June 4, according to a notice sent to state and county FSA offices on May 31. Payments will be issued directly to producers via electronic deposit; there will be no paper checks, according to Wayne Maloney, in the FSA public affairs office, Washington, D.C.
MPP-Dairy payments are triggered when the margin between the national all-milk price and the national average feed cost falls below the margin trigger selected by the dairy famer during the MPP-Dairy enrollment period.
Coverage elections made for 2018 are retroactive to Jan. 1, 2018. USDA prices for milk and feeds required to determine the national average margin have been released for January through April, with MPP-Dairy payments triggered for February, March and April for any dairy operations that elected coverage levels of $7, $7.50 and $8 per hundredweight (cwt). Monthly margins and indemnity payment rates at the three coverage levels are listed in Table 1.
Sample herd
The payment rate calculation (Table 1) determines the amount that the margin trigger elected by the dairy operation exceeds the average actual dairy margin for a month. To determine the actual payment, further calculations must incorporate the annual production history, the percentage of milk covered (ranging from 25 to 90 percent), then divided by 12 to get the monthly milk volume eligible for payment.
For example, a dairy herd with annual production history of 6.25 million pounds of milk and electing to cover 80 percent of that milk (5 million pounds) would be eligible for payment on 4,167 hundredweights (5 million pounds divided by 100 divided by 12) per month.
The 4,167 hundredweights multiplied by $1.23163 per cwt would yield a payment of $5,132 for March. But, we’re not quite done.
Due to a congressional budgetary maneuver implemented many years ago, any government payments are subject to a 6.6 percent “sequestration” deduction. In this example, the sequestration deduction is about $339, yielding a net MPP-Dairy payment of $4,793 for March.
Dairy farmers who filled out an optional Form CCC-36 and created an assignment on indemnity payments to cover premium charges will also see a premium deduction (14.2 cents per cwt at the $8 coverage level). Premiums will not be deducted unless Form CCC-36 was filed with the FSA office. The full balance of the premium is due Sept 4, 2018.
February-April payments guaranteed at top levels
Not only are MPP-Dairy indemnity payments already guaranteed at the top coverage levels for February-April, but those payments will surpass the cost of premiums at the $8-per-cwt margin coverage level for the entire year.
University of Minnesota dairy economist Marin Bozic projected the following payments for those producers for February-April, annual premium/administrative costs and net returns for the period, after 6.6 percent sequestration deductions:
• 5 million pounds – (indemnity payments) $14,523; (premiums/administrative costs) $7,200; and (net return) $7,323
• 4 million pounds – $11,618; $5,780; $5,838
• 3 million pounds – $8,714; $4,360; $4,354
• 2 million pounds – $5,809; $2,940; $2,869
• 1 million pounds – $2,905; $1,520; $1,385
Based on price conditions as of June 1, Bozic projected the following returns (above premium and administrative costs) for those enrolled in MPP-Dairy for 2018 at the Tier I, $8 per cwt coverage level, at various milk volumes:
• 5 million pounds – $16,126
• 4 million pounds – $12,883
• 3 million pounds – $9,695
• 2 million pounds – $6,395
• 1 million pounds – $3,150 
-
Dave Natzke
- Editor
- Progressive Dairyman
- Email Dave Natzke
