Overview of Dairy Margin Protection Program

The final rules on the Dairy Margin Protection Program are now public. Here is an overview:

County Farm Service Agency offices will administer the Margin Protection Program (MPP). Program Years will run on a calendar year.

  • $100 administrative fee for all coverage levels
  • For 2015, producers have from September 2nd to November 28th to sign up
  • For 2016 and for the remainder of the program, the sign up period will be from July 1st to September 30th.
  • 25% of the premium payment is due February 1st with the remaining 75% due on June 1st each year.

Base Production – Highest annual production from 2011, 2012, or 2013.This amount will be adjusted periodically by USDA based on national production figures.There are no options for dairy operations to increase production history once it has been established.

If a new dairy operation started in February 7, 2013 or later, the owner has two options:

  1. Use the volume of milk marketed for the months the operation were in production and have it extrapolated over a year
  2. Estimate the production based on herd size and herd data from USDA

Coverage level – from 25-90% of producer’s base. Producers can change their margin level and percentage of milk covered on an annual basis in 5% increments. All producers will be eligible to receive the lower premium level on the first 4 million pounds of annual milk production.

  • MPP margin is calculated from a fixed ration that includes the estimated feed needs for the milking herd, dry cows and heifers to produce 100 lbs of milk. The feed cost is determined by multiplying the ration components by monthly national average reported prices. Subtracting this “Average Feed Cost” from the monthly “All Milk Price” yields the “Actual Dairy Production Margin”.
  • Premiums A participating dairy operation shall pay an annual premium by multiplying the coverage percentage elected by the participating dairy farm times the production history of the participating dairy operation and the premium per hundredweight of milk for the coverage level selected. In calendar years 2014 &2015 there will be a 25% premium discount on the first 4 million lbs of covered milk for coverage level threshold between $4.50 & $7.50.

Dairy Production Donation does not kick in until the margin level reaches $4.00 per hundred weight.

Indemnity payments The Actual Dairy Production  Margin for the applicable consecutive 2- month period, less the coverage level threshold selected by the participating dairy operation  times the coverage percentage selected by the participating dairy operation; and the production history of the participating dairy operation divided by 6.

Conservation Compliance:Same as the requirements were for MILC. The operation must own or develop a plan with NRCS on the farm’s highly erodible land and be subject to wetland conservation compliance provisions as well.The Conservation Compliance provisions are separate from the requirements for producers buying crop insurance.

Existing LGM-Dairy contracts can transition into MPP after the policy terminates but producers must let FSA know their intentions this fall.

This program effectively replaces the existing MILC Program. To review a comparison between the new Dairy MPP program and the existing LGM-Dairy program, click here.

For more details about the Dairy Margin Protection Program, click here.