Some dairy producers could see total 2018 Margin Protection Program for Dairy (MPP-Dairy) premium payments recouped within two months.
Marin Bozic, assistant professor in dairy foods marketing economics at the University of Minnesota, updates weekly MPP-Dairy projections each Friday in the Minnesota Milk Producers Association digital newsletter, the Milk Minute. Bozic calculates net cash flows for MPP-Dairy participants using a Margin Protection Program Decision Tool.
Dairy producers have until June 1 to enroll in MPP-Dairy for 2018. Even though the enrollment deadline is more than a month away, producers who enroll by that date will be eligible for indemnity payments retroactive to the beginning of the year.
February 2018 MPP-Dairy insurable margins already guarantee a payment for those who elect coverage at $7.50 and $8 per hundredweight (cwt) levels, with payments also all but assured for several more months. The March 2018 margin will be announced on April 27.
Bozic’s “Predicted MPP-Dairy Cash Flow for 2018” calculates MPP-Dairy premium costs and estimated monthly indemnity payments for a dairy operation covering 90 percent of 3 million pounds of annual milk production (2.7 million pounds of milk covered per year).
At $8 per cwt margin coverage, total premium cost for 2018 would be $3,834. The premium would not be due until Sept. 1, 2018.
Based on milk and feed price estimates as of April 19, Bozic’s projections indicate February-March indemnity payments for the example dairy farm would surpass total annual premium costs (Table 1).
Under new MPP-Dairy rules approved in February’s Bipartisan Budget Act, USDA’s Farm Service Agency (FSA) will calculate actual margins monthly rather than every other month. Premium levels for Tier I (5 million pounds of milk or less per year) were also substantially reduced. (Read: MPP-Dairy 2018 enrollment open, April 9 through June 1.) With those changes, MPP-Dairy is forecast to provide net positive cash flow at the highest insurable margins over the next few months, Bozic said.
In addition to Bozic’s projections, individual producers can calculate their own potential margins, premiums and indemnity payments using the Margin Protection Program Decision Tool.
The new sign-up period allows dairy producers, including those who previously signed up and those who did not, an opportunity to make new elections for 2018. Producers who previously elected coverage for 2018 must re-enroll by June 1.
All producers who want coverage for 2018 must register by completing form CCC-782, elect a coverage level and pay the $100 administrative fee, unless you qualify for a waiver, by June 1, 2018. If the dairy operation participated in MPP-Dairy for 2017, the dairy operation’s production history will be increased by a factor of 1.0186.
Monthly MPP-Dairy margins are generally announced in conjunction with USDA Ag Prices reports near the end of each month. With the 2018 program retroactive to January, actual MPP-Dairy margins will be available for January-March by about April 27. The May Ag Prices report is scheduled for Tuesday, May 30, just before the June 1 deadline. So, April MPP-Dairy margins could be known by the enrollment deadline. (Read: There’s still time to weigh dairy safety net options.)
Payments under MPP-Dairy may be reduced by a certain percentage due to a sequester order required by Congress.
Bozic will offer an MPP-Dairy webinar for Minnesota and other Midwest producers on May 2 at 11:30 a.m. CST. For more information, visit the University of Minnesota website. 
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Dave Natzke
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