Although final rules about the Margin Protection Program (MPP) will not be issued by the U.S. Department of Agriculture (USDA) until September, there are some provisions that were specifically dictated in the legislation. Below are answers to some of the most frequently asked questions. These answers and more are also available to DFA members by logging into myDFA at dfamilk.com.
How will the MPP work?
- In the first year of the MPP, coverage will be limited solely to the volume of milk equivalent to the producer’s production history.
- Production history is defined as the highest level of annual milk production during 2011, 2012 or 2013.
- In subsequent years, annual adjustments to the producer’s production history will be made based on the national average growth in overall U.S. milk production as estimated by USDA. Any growth beyond the national average increase will not be protected by the program.
- Producers will be able to protect from 25 percent to 90 percent of their production history in 5-percent increments.
- Producers will be able to select margin protection coverage from $4 per hundredweight to $8 per hundredweight in 50-cent increments.
- Payments will be made to producers based on the percentage of their production history they have chosen to protect (25-90 percent) and the level of margin coverage they have selected ($4 to $8 per hundredweight).
- Payments will be distributed when monthly margins fall below producers’ selected level of coverage during a defined two-month period.
- The Milk Income Loss Contract program will be in effect until the implementation of the Margin Protection Program or September 1, 2014, whichever occurs first. At this time, economists do not predict MILC program payments for 2014.
- Premiums charged for each level of coverage will be fixed for five years (through 2018) and are as follows:
How is margin calculated?
- USDA calculates the margin using the all-milk price minus the average feed cost.
How is average feed cost calculated?
- Average feed cost is determined by the USDA secretary using a feed ration consisting of the following formula:
- USDA corn price per bushel × 1.0728
- Plus USDA soybean meal price per ton × 0.00735
- Plus USDA alfalfa hay price per ton × 0.0137
What is the payment limit on funds received under this program?
- There is no payment limit applied to the Margin Protection Program.