Dairy MPP – strategies for my farm

MPP

Dairy Margin Protection Program (MPP) was enacted in the Agricultural Act of 2014 (2014 Farm Bill).  The program was an insurance mechanism for dairy producers to protect milk price/feed cost margin by selecting a coverage level from $4.00 to $8.00/cwt. Also producers need to select coverage percentage between 25 percent and 90 percent of annual pounds produced. The program initially had mixed results with most farmers only receiving enough payments to cover their enrollment fees. In April 2018 The Bipartisan Act of 2018 was passed, making changes to the MPP payment structure, resulting in better benefits to most dairy farmers. 

Changes to MPP

  • Calculations are monthly, instead of bi-monthly of margins. 
  • Pounds of milk covered increased in Tier 1 to 5 million pounds/year, from 4.
  • Premium rates reduced significantly.
  • Certain groups, beginning, limited resource, disadvantaged, or military veteran farmers may qualify for administrative fees. 
  • Must re-enroll by June 1, 2018.
  • Not be enrolled in the Risk Management Agency's Livestock Gross Margin for Dairy program (LGM-Dairy).

Payment structure

Table 1 shows the dollar amount per hundred weight for the different coverage levels.  Tier 1 has been changed from 4 million pounds to 5 million pounds and the premiums have been reduced. 

To be eligible

  • Produce and commercially market milk from cows located in the United States.
  • Provide proof of milk production at the time of registration.

Table 1: Premium for MPP-Dairy, not including $100 administrative fee (dollars per cwt.)

Coverage Level TIER 1 - 2014 TO 2017 Tier 1 - 2018 Tier 2
Pounds of milk sold annually 4 M lbs or less 5 M lbs or less over 5 M
4 0 0 0
4.5 0.008 0 0.02
5 0.019 0 0.04
5.5 0.03 0.009 0.1
6 0.041 0.016 0.155
6.5 0.068 0.04 0.29
7 0.163 0.063 0.83
7.5 0.225 0.087 1.03
8 0.475 0.142 1.36

Table 2: expected returns on different criteria

Coverage level 1 M lbs 90% 1 M lbs 70% 3 M lbs 90% 3 M lbs 70%
8 2938 2263 9015 6989
7.5 1345 1024 4234 3271
7 -59 -68 23 -5
6.5 -450 -372 -1149 -916
6 -252 -218 -557 -455
5.5 -186 -167 -359 -302
5 -100 -100 -100 -100
4.5 -100 -100 -100 -100
4 -100 -100 -100 -100

Nathan J. Hulinsky, Extension educator

Reviewed in 2018

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