USDA Secretary Sonny Perdue has responded to requests by the dairy industry and program participants to allow dairy farmers enrolled in the Margin Protection Program to opt out for 2018.
Producers who enrolled in the program for the life of the 2014 Farm Bill are required to pay an annual $100 administrative fee for coverage that guarantees a $4 per hundredweight margin between the price of milk and the cost of feed. Both are calculated on a national basis.
Farmers can also purchase buy-up coverage up to an $8 guaranteed margin and can change their level of coverage each year.
But the program has not performed as anticipated. Buy-up coverage has dwindled with each annual enrollment, but producers were locked into participation for the life of the farm bill.
National Milk Producers Federation — which developed the program that was later changed by Congress — released a statement on Thursday saying the opt-out allowance is a welcome development, “in that it acknowledges the widespread dissatisfaction among farmers enrolled in the program.”
“Simply put, the way the program was enacted in the 2014 Farm Bill, it does not meet the needs of America’s dairy farmers today, and declining participation levels amply illustrate farmers’ disenchantment....”
Dairy farmers have complained USDA’s margin calculations for the program don’t reflect reality and overstate the margins dairy farmers actually see. The program failed to protect them when milk prices collapsed in 2015 and fell farther in 2016.
About half of the nation’s dairy farmers signed up for the program, representing about 80 percent of U.S. milk production. In 2015, 56 percent purchased buy-up coverage on 88 percent of the milk in the program.
In 2016, only 23 percent of participating farms purchased buy-up coverage representing 12 percent of insured milk.
For 2017, only 8 percent of participating producers purchased buy-up coverage on only 2 percent of the insured milk.
The program has been a disappointment to many dairy farmers, which is why NMPF has been working with USDA and Congress to make significant improvements, NMPF stated.
Given the level of disappointment, the organization had suggested to USDA that one option would be to allow dairy farmers to opt out in 2018.
Farmers who do choose to opt out will then be able to enroll in the Livestock Gross Margin program, another federal risk-management program. Participation in both is currently prohibited, an issue NMPF is working to change.
Other changes the organization is recommending for MPP are the farm bill budget for the program, using more precise data to calculate feed costs, improving the affordability of premiums, greater sign-up flexibility and expanding the use of other risk-management tools in conjunction with the program.