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Here is what you said on the new dairy safety net

Marin Bozic and Chris Wolf Published on 17 October 2014

In the period leading up to the start of the Margin Protection Program for Dairy Producers (MPP-Dairy), a survey was undertaken to assess dairy farmer knowledge, attitudes, impressions and participation decisions. The survey had both mail and Internet form.

Potential dairy farmer respondents were recruited online with the help of dairy farm industry publications and dairy cooperatives and through mailed surveys using state lists of licensed operations shipping milk.

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The survey information was collected prior to the start of MPP-Dairy on Sept. 2, 2014. Up to and including Sept. 1, there were 669 usable responses. Of those responses, 327 were from Internet respondents, and 342 were mail respondents.

Margin Protection Program knowledge

The majority of respondents indicated that they had “some” knowledge about MPP-Dairy. About a quarter of respondents had no knowledge, and only a bit more than 10 percent assessed their knowledge level as “a great deal.”

Examining knowledge level by respondent herd size reveals that the operators of very large herds (2,000-plus milk cows) had relatively more knowledge about MPP-Dairy than the smaller herd operators.

Knowledge about MPP was distributed similarly across regions, except the Central/Plains/Mountain region (which includes several major dairy states such as New Mexico, Idaho, Texas, Kansas and South Dakota) respondents characterized their knowledge level higher than other regions.

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Margin Protection Program sign up

Respondents were asked to assess the likelihood that they would sign up (register) for MPP-Dairy. Almost 40 percent said they were “likely” or “very likely,” 30 percent were undecided, and another 30 percent said they are either “unlikely” or “very unlikely” given current information and market conditions.

By region, less than 15 percent of respondents in the Pacific region said they were unlikely or very unlikely to participate. In contrast, more than 37 percent of respondents from the Upper Midwest said they were unlikely or very unlikely to participate.

Assessed across herd size categories, operators of the smallest herds (less than 100 milk cows) characterized their sign-up likelihood as unlikely or very unlikely at a significantly higher rate than operators of larger herds.

Meanwhile, more than half of operators of the largest herds (2,000-plus milk cows) indicated they were likely or very likely to sign up. Categorized by their self-assessed level of MPP knowledge, more knowledge was correlated with increased likelihood of planned sign-up. Similarly, operators with a more favorable impression of MPP were more likely to plan to participate.

Margin Protection Program coverage level

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With $4 per hundredweight (cwt) coverage level being available for the $100 administration fee and no marginal cost as far as premiums, it is not surprising that more than 28 percent of respondents indicated that would be the coverage level they would choose in most years.

The next most common level was $6 per cwt followed by $6.50 per cwt. Premiums climb relatively quickly at $7 per cwt and up, and respondents indicated that most did not expect to choose those levels in most years.

Livestock Gross Margin insurance for Dairy (LGM-Dairy) has not been widely adopted for a host of reasons, including limited funding for premium subsidies. The 2014 Farm Bill mandated that dairy farmers could not participate in both MPP-Dairy and LGM-Dairy. Survey participants were asked which they would choose if they had to make a one-time decision.

The overwhelming majority of respondents indicated they would choose MPP-Dairy. This was less so for respondents who had used LGM-Dairy previously, but still 70 percent of those dairy farm operators indicated that they would choose MPP-Dairy. PD

Chris Wolf is a professor in the Department of Agricultural, Food and Resource Economics at Michigan State University.

marin bozic

Marin Bozic
Assistant Professor
Department of Applied Economics
University of Minnesota – Twin Cities

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