Dairy producers will have some risk management opportunities under the provisions of the new Farm Bill.
Joe Horner, a University of Missouri Extension dairy and beef specialist, says the final rules are still being written, but the indications so far are that the programs will be much more helpful than the Margin Protection Program (MPP) was under the previous Farm Bill.
“They merged the Margin Protection Program into the Dairy Margin Coverage program,” Horner says. “For the first 5 million pounds of milk, insurance levels are higher, and the insurance premiums are lower.”
The new version of the program should provide a better safety net than the MPP did.
“If the program would have been like this for the last Farm Bill, it would have been a lot better for our small dairies,” Horner says.
The MPP initially had a high participation rate, but that didn’t last.
“There was a high participation rate once MPP came out, about two-thirds the first year,” Horner says. “It fell off pretty quickly once they found out it wasn’t helping. The program just wasn’t designed to make money for dairy producers.”
With the more favorable Dairy Margin Coverage program, Horner expects most producers to again give it a shot.
“I would expect that in 2019 there will be high participation rates,” he says.
Signups will be retroactive to Jan. 1, 2019, and Horner expects given the current situation, most producers will sign up for the $9.50 level.
“That will give them the highest return this year,” he says. “This year will be a fairly straightforward decision. … But that may not be the case in future years if we get higher prices.”
The latest Farm Bill also has a Dairy Revenue Protection program, sold through crop insurance agents. Horner says most dairy producers should focus first on the Dairy Margin Coverage, but the revenue protection could be worth taking a look at, especially for larger producers.
“Dairy farmers can watch up to five quarters in the future,” he says. “They’ll be able to lock in revenue levels. They can use that to customize a revenue forecast. They can pay an insurance premium, subsidized, and lock in a revenue amount. It’ll allow people who are significantly leveraged to have some protection from falling milk prices.”
Horner says the government shutdown has delayed implementation of the entire Farm Bill, although dairy seems to be a priority. It’s a good time to be getting some risk management options.
“We’re starting the year with financial stress,” he says. “We anticipate a better milk price this year. This new Farm Bill program should help, and probably should be better (than the MPP).”