Dairy experts are urging farmers to sign up for a new program included in the Farm Bill that is their only safety net for fluctuating milk prices.
The Margin Protection Program for dairy replaces the federal MILC — or Milk Income Loss Contract — program that helps farmers when the price to the farmer falls. The Margin Protection Program — or MPP — is a risk management system covering farmers when the difference between the price of milk and feed falls below the coverage levels that the farmer has chosen.
Farmers must sign up for the program by December 1st or they will be locked out for 2015. According to the Northeast Dairy Farmers’ Cooperative’s most recent newsletter, as of early November 2,050 out of about 46,000 dairy producers nationwide had signed up. Senior Dairy Policy Advisor Bob Gray hopes there will be a surge of enrollments in the next week. “What has happened here I think is they’re coming off a very good year. But all the signals are there for low prices. First of all we’ve got over-production. We’ve got a tempering of exports. We’ve been exporting as much as 17 and a half percent of our annual production in the U.S., which is the highest ever. But that’s slowed down. So the combination between that and excess milk production means that prices are going to go down. There isn’t any economist that wouldn’t say that that’s the case.”
Gray says the question becomes how low milk prices will fall. Agrimark Dairy Economist Bob Wellington believes it’s imperative farmers enroll in the program due to the potential for a price collapse.
“We don’t know what the price levels are going to be for next year. We have some forecasts that are just looking at a five or six dollar decline, which is a big decline. Our concern is that it could be substantially more than that and the MPP is the only program we have, and it’s actually a very effective program. Farmers do have to lay out some money like they would for insurance. We got the rates down very low. We think this is a very prudent expense going into an uncertain year like 2015.”
Vermont Farm Bureau President Clark Hinsdale is advising dairy farmers to sign up for at least minimum coverage. “The minimum coverage would’ ve kicked in in 2009 when we had that disastrous dairy year, the worst dairy year in recorded history. So even though it’s unlikely to see dairy prices get low enough to kick in at that minimum insured level we have seen it happen five years ago. So $100 is little enough to pay for being in the game and having the catastrophic coverage.”
New York Farm Bureau spokesman Steve Ammerman notes that farmers may have delayed because much of the enrollment period has been in the middle of the fall harvest. “We do believe this is a much better program than the previous risk management program under the old Farm Bill.” Why is it better than MILC? “It provides better protection because it takes feed costs also into greater account as opposed to just a milk price. Also this provides more flexibility for farmers. There is the base catastrophic rate. But if farmers feel like they need higher coverage they can opt in and pay for additional coverage. So that flexibility also is important for our farmers.”