About 345 dairy farmers participating in the Margin Protection Program for Dairy (MPP-Dairy) will see indemnity payments this month.
April’s MPP-Dairy average milk income margin over feed costs fell to just $6.83 per hundredweight, the lowest level in the program’s short history. When combined with March calculations, the average margin for the 2-month pay period was about $7.15 per hundredweight, meaning any farmers insured at $7.50 or $8 per hundredweight margin levels will see payments for one-sixth of their annual milk production. Individual payments will be subject to a 7.3 percent federal sequestration deduction.
The 345 dairy herds with insured margins at $7.50 and $8.00 levels represent about 1.5 percent of the 23,328 total MPP-Dairy participants.
April margin factors
At $15 per hundredweight, April 2016 milk prices continued to slide, while feed prices were higher.
Feed costs averaged $8.17 per hundredweight nationally, with more than a $27.50 per ton jump in soybean meal and a $9 per ton increase for alfalfa hay compared to March.
See historical factors used in the calculation.
Based on projections from the Program on Dairy Markets and Policy, MPP-Dairy margins could dip below $6 per hundredweight in May through July 2016, turning above $8 per hundredweight in October.
About 4,425 dairy herds have margins insured at $6 to $8 levels, about 19 percent of the total.
Read: Dairy safety net in need of patches.
State margins
USDA uses national average milk, corn and alfalfa hay prices, along with a central soybean meal price to calculate the monthly national MPP-Dairy income margin.
Selected state margins for April 2016, using the MPP-Dairy formula and state prices for corn, alfalfa hay and milk reported by USDA, range from a high of $9.10 per hundred weight in South Dakota to a low of $6.07 per hundred weight in Michigan, a difference of $3.03 per hundredweight, according to Progressive Dairyman calculations
Next enrollment period starts July 1
The 2017 MPP-Dairy enrollment period is open July 1 to Sept. 30, 2016. Recent USDA adjustments to the program will be in affect.
One change, implemented retroactively for all of 2016, ensures all herds enrolled in MPP-Dairy will receive catastrophic coverage at the basic $4 per hundredweight margin level on 90 percent of their production history.
Another adjustment allows a one-time restructuring of the dairy’s production history to accommodate new family members joining the dairy operation. This intergenerational transfer of production history is for children and grandchildren and their spouses who join a dairy operation.
During the July 1 to September 30 period, any dairy operation already enrolled in MPP will be able to use the intergenerational transfer provision to increase the operation’s production history up to 4 million pounds per year. Each participating dairy operation is authorized one intergenerational transfer at any time of its choosing until 2018.
USDA also codified a previous policy change giving dairy farmers the opportunity to pay their premium through additional options, such as a periodic milk check deduction handled by their cooperative. PD
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Dave Natzke
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