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USDA initiating MPP-Dairy premium refund process

Progressive Dairyman Editor Dave Natzke Published on 01 April 2019

There have been lots of conversations and behind-the-scenes activity related to the new federal dairy safety net program – the Dairy Margin Coverage (DMC) program – but dairy farmers will have to wait a little longer to see the benefits.

Created in the 2018 Farm Bill, the DMC replaces the Margin Protection Program for Dairy (MPP-Dairy), which expired at the end of 2018. Earlier this year, USDA Secretary Sonny Perdue laid out a tentative timeline for implementation of DMC program. (Read: Perdue lays out possible DMC timeline.) Sign-up for DMC is scheduled to start on June 17, with DMC payments retroactive to Jan. 1, 2019, starting on July 8.

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When enrollment opens, dairy farmers who cover 5 million pounds of milk at the top margin coverage level of $9.50 per hundredweight are already guaranteed to see a positive return on their premiums. (Read: February margin assures DMC payments will surpass 2019 premium costs.)

Despite a partial government shutdown that delayed things, the USDA has taken some steps to implement other farm bill provisions, including amending the formula used to calculate Class I skim milk prices under the Federal Milk Marketing Order system (Read: Weekly Digest: USDA amends Class I skim milk price formula) and opening a sign-up period for some producers who had been blocked from participating in MPP-Dairy in 2018. (Read: Weekly Digest: ‘Retroactive’ MPP-Dairy sign-up open through May 10.)

Most recently, the USDA’s Farm Service Agency (FSA) sent a notice to state and county FSA offices with instructions on how to determine MPP-Dairy premium refunds for eligible dairy operations. According to Perdue’s initial timeline, past participants of MPP-Dairy who are eligible for premium refunds should see payments by the end of April. The cash refunds will also apply for eligible deceased, dissolved and/or retired dairy operations.

A dairy operation is eligible to receive an MPP-Dairy premium refund if it participated in MPP-Dairy for any calendar years 2014 through 2017 and paid a premium in any of those years that exceeded an indemnity payment issued for that year. FSA county and state offices must determine which dairy operations are eligible for premium refunds and reconcile premiums paid and indemnity payments received.

According to the FSA notice, the repayment is equal to the difference between the total amount of premiums paid by the participating dairy operations for each applicable calendar year and the total amount of MPP-Dairy payments made to the participating dairy operation that year. MPP-Dairy indemnity payments were made to some producers in 2015 and 2016, but not in 2014 or 2017.

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Refunds are available to eligible dairy operation in two forms:

• The dairy operation can elect to receive a repayment in an amount equal to 75 percent of the refund as a credit to be used to pay DMC premiums in 2019.

• The dairy operation can elect to receive an amount equal to 50 percent of the refund as a direct cash repayment.

DMC fast track urged

Eligible dairy operations must submit the one-time refund election by the conclusion of the 2019 DMC election period, which starts June 17. However, citing the continued loss of dairy farms, members of the House and Senate sent letters to Perdue on March 27, urging the USDA to prioritize the implementation of the DMC.

“Given what’s facing dairy farmers, USDA needs to get a move on implementing these dairy programs as soon as possible,” said U.S. Rep. Collin Peterson (D-Minnesota), chair of the House Ag Committee.

“The 2018 Farm Bill provides dairy farmers with better risk management tools, improved coverage and more affordable options,” added Rep. Glenn Thompson (R-Pennsylvania), ranking member of the House Ag Committee’s Subcommittee on General Farm Commodities and Risk Management. “USDA should fast-track these changes as times remain difficult and producers around the nation need more options.”  end mark

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Dave Natzke
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