July first already?! Half-way through 2015 — and also the first year of the Dairy Margin Protection Program.
The Margin Protection Program replaced the Milk Income Loss Contract program and the $9.90 minimum Class III support price programs for U.S. dairy farmers. The sign-up period for 2016 participation opened July 1 and is scheduled to run through Sept. 30.
With this “regularly scheduled” sign-up period, farmers now have to make their decisions a full quarter before the coverage period of Jan. 1 through Dec. 31, 2016.
2015 sign-up late
The 2014-2015 sign-up was uniquely late (Sept. 2 through Dec. 19) due to the time needed to establish rules for the program following the 2014 Farm Bill’s passage, and deadline extensions. The advantage of that later sign-up was that we had a better feel for what 2015 might look like than we will have for 2016, when the coverage decisions have to be locked in by Sept. 30.
The bottom line is that none of us can predict what milk prices will be three to 15 months away. The futures and options markets predict what milk prices might be, based on today’s known facts and somebody’s guesses about the future.
Make changes for 2016
During the 2016 sign-up period, producers enrolled in the program for 2015 have the opportunity to change their coverage level and how much of their production history they want to cover.
Participating producers that do not go to their local Farm Service Agency office and select a coverage level for 2016 will default to the “catastrophic” coverage level of $4 per cwt. on 90 percent of their production history (no matter what they selected for 2015). They will be charged the $100 per farm administrative fee.
Sign up by Sept. 30
If you want to buy coverage for 2016 to a margin between $4.50 and $8 (in 50-cent increments), on a specified percentage of your base production between 25 and 90 percent (in 5 percent increments), you need to set up an appointment with your FSA office before Sept. 30.
An important change from the 2014-2015 sign up is that premiums for the first 4 million pounds of covered milk will be charged at the full rate. There was a 25 percent reduction in these premiums for $4.50 through $7.50 coverage levels in place for the first sign-up period.
2015 calculations
If you enrolled in the program in 2015, your 2015 production history was calculated using your farm’s highest annual production from 2011, 2012 or 2013. The highest year’s production was then increased by 0.87 percent to establish the 2015 PH. Your 2015 production history will automatically be increased this year by a recently announced 2.61 percent to calculate your 2016 PH.
Farmers who chose not to participate in 2015, but would like to participate in 2016, should work with their FSA office to establish their PH and make their coverage selections. Their PH will still also start with the highest annual production for 2011, 2012 or 2013, but will not include the 0.87 percent increase received by farms that enrolled in 2015.
For more info
Want to brush up on the Milk Protection Program before you make these decisions? On Aug. 6, the Regional Dairy Update will be from 10:30 to 1:30 p.m. at Ohio Agricultural Research and Development Center in Wooster, Ohio. You can contact the Wayne County Extension Office at 330-264-8722 or your own extension and FSA office for resources.
More details are also available at dairymarkets.org.
