New dairy programs approved under the 2018 Farm Bill were a priority for Land O’Lakes, Inc. and our industry – and this spring, USDA has started to provide updates for dairy farmers as new programs in the bill are implemented.
Here are the most recent updates from USDA on the dairy provisions of the bill. This page will be updated as USDA releases additional information.
USDA implements new Class I pricing formula
Beginning for May, USDA started to utilize a pricing formula established in the 2018 Farm Bill. In case you missed it, you can read more about this formula in this recent Connections article.
Dairy Margin Coverage decision tool online – program signup expected June 17
Last week, USDA formally announced the launch of the new web-based decision tool to help dairy farmers evaluate various scenarios using different Dairy Margin Coverage (DMC) coverage levels. Developed alongside the University of Wisconsin, the decision tool assists producers with calculating total premiums costs and administrative fees associated with participation in DMC. It also forecasts payments that will be made during the coverage year based on futures prices.
DMC, a voluntary risk management program that offers financial protection to dairy producers when income over feed margin, or the difference between the announced all milk price and the USDA average feed cost, falls below a certain dollar amount selected by the producer. It replaces the previous Margin Protection Program. Signup for this Farm Service Agency program is expected to open on June 17.
Additional details released on Dairy Revenue Protection
USDA’s Risk Management Agency (RMA) also recently announced more details on risk management programs to provide a more efficient level of coverage for livestock and dairy producers. Importantly, the 2018 Farm Bill allows producers to enroll in Dairy Revenue Protection (DRP) or Livestock Gross Margin-Dairy (LGM-Dairy) and also simultaneously participate in Dairy Margin Coverage. Members are encouraged to study and evaluate these programs as part of their business planning process.
USDA announced several new components of DRP for the 2020 crop year:
The minimum declared protein range is expanded from the current 3.00-4.00 range to a lower protein level at 2.75, leaving the range to be 2.75-4.00 pounds;
Removed the declared butterfat test to declared protein test ratio to simplify the process for dairy producers; and
Adjusted the coverage levels with removal of the 70 and 75 percent coverage levels.
These combined changes afford greater coverage flexibility for dairy producers.
DRP is designed to insure for unexpected declines in the quarterly revenue from milk sales compared with a guaranteed coverage level. The expected revenue is based on futures prices for milk and dairy commodities and the amount of covered milk production elected by the dairy producer. The covered milk production is indexed to the state or region where a dairy farmer is located.
The full announcement from USDA is available here.
“Every dairy farm is different, and farmers should look at how DMC, DRP or a combination of the programs – along with other risk management tools – can play a part in their business planning,” says Corey Ramsden, manager of member risk management at Land O’Lakes. “This new Farm Bill provides farmers with even more flexibility in their risk management planning by allowing them to use both DMC and insurance tools like DRP and LGM-Dairy.”
MPP repayments forthcoming in 2019
USDA last week announced additional information on Margin Protection Program repayments. The 2018 Farm Bill provided for repayment of 2014-2017 MPP premiums, excluding administrative fees if the premium paid exceeded the MPP payments received by the operation. Producers have several repayment options. These include receiving 50% of the repayment as a direct cash repayment, or 75% of the premium as a credit toward Dairy Margin Coverage for the 2019-2023 coverage years. Election for these options ends on September 20.
USDA has indicated that qualification letters from FSA for individual farms will be sent soon.
Repayment can be transferred to a new farm ownership structure, further enhancing options when deciding how to utilize the repayment.
With questions about your individual farm, contact your local FSA service center.
Sadie Frericks testifies at U.S. House hearing on the dairy industry
As USDA continues the process of implementing dairy programs in the new Farm Bill, Land O’Lakes and our members continue to engage with policymakers at USDA and on Capitol Hill to share information and insights on the dairy industry.
Last week, Sadie Frericks, a Land O’Lakes member from Melrose, MN, was invited to testify before the U.S. House Agriculture Subcommittee on Livestock. The subcommittee devoted a hearing to examining the state of the dairy industry and the programs provided under the new Farm Bill.
Photo courtesy U.S. House Agriculture Committee
Frericks discussed the importance of an improved farm safety net for dairy farmers through programs in the new Farm Bill.
“I can tell you that our farm business would not survive another year like 2018. We talked countless times about how to adjust our business plan so that we can keep doing what we love. Each time, that discussion ended with reducing the size of our herd and one of us getting a job in town,” Frericks said in her testimony.
“We aren’t having those discussions anymore. First, we set a price floor through the new Dairy Revenue Protection insurance that was approved by USDA last year. Second, by our calculations, the federal Dairy Margin Coverage program will help us mitigate risk and secure a profit going forward. We will continue working together, with our children, to care for our cows and our land.”
You can read Sadie’s testimony here and watch video of the hearing here.
Members are encouraged to follow this page as program implementation continues. In addition, USDA’s Farm Bill page is available here. With questions, contact your member services representative, or email email@example.com.