Dairy farmers face insurance deadline
ADDISON COUNTY — For qualifying Vermont farmers, this year’s Margin Protection Plan for Dairy (MPP-Dairy) could amount to free money.
But only for those who sign up for it by June 1.
While some farmers and dairy industry watchers have been critical of the program, which aims to help dairy farmers get by when milk prices are low, most welcome the support offered in some recent changes to MPP-Dairy.
Vermont dairy famers have seen prices plummet for the milk they produce. Farm gate prices went from a high in September 2014 of around $24 per hundredweight — 100 pounds of milk, or a little more than 11 gallons — to $19.70 in February 2017 to $15.90 in February 2018.
MPP-Dairy is designed to protect dairy farmers by paying them when the difference between the price of milk and the price of feed falls below a certain dollar amount set by the farmer, a difference known as the “margin.” Coverage is divided into Tier 1 (basic coverage) and Tier 2 (coverage for a higher volume of milk) and ranges from the $4 margin, all the way up to $8.
Farmers must sign up and pay a premium to get this coverage, so it is essentially insurance for farmers.
Sweeping changes to the program, orchestrated in part by U.S. Sen. Patrick Leahy, D-Vt., as part of the Bipartisan Budget Act of 2018, make enrollment worth investigating, program supporters say.
Among those changes:
• Reduced premiums. The cost of coverage at the $8 Tier 1 level has been reduced by 70 percent, from 47.5 cents per hundredweight of milk (cwt) to 14.2 cents. Coverage at the $7.50 level, which used to cost 30 cents per cwt, now costs 9 cents.
• More milk production is covered. The maximum coverage in Tier 1 has been increased from 4 million pounds of milk to 5 million pounds, roughly the annual production equivalence of 250 cows.
• Margin calculations will now be performed monthly, rather than bi-monthly, which will protect against price swings, such as those seen in the past, where one month qualifies for coverage payments but the adjacent month’s margin is high enough to cancel it out.
• The annual $100 administrative fee for the program will be waived for farmers who meet the USDA criteria as “beginning, limited resource, disadvantaged or military veteran farmers.” Qualifying farmers who signed up before the waiver was instituted may apply for a refund.
• This year’s program is retroactive, so anyone who signs up now already knows to some extent what they’re getting into.
This is where the free money comes in.
The February and March MPP margins were $6.88 and $6.77 per cwt, respectively, triggering program payments of $1.12 and $1.23 per cwt at the $8 Tier 1 level. This nets a combined $2.07 per cwt for those two months — for anyone who has signed up by June 1.
Even if MPP-Dairy isn’t triggered for the rest of 2018, farmers covering 5 million pounds at the $8 level are guaranteed a minimum positive return of 3.9 cents per cwt for the year, according to the U.S. Farm Bureau.
It is widely anticipated, however, that the MPP-Dairy will be triggered again in 2018 — at least through June. As of mid-May, the USDA’s MPP Decision Tool was forecasting potential program payments of $1.30 per cwt for April, 84 cents for May and 13 cents for June. For a farm covering 5 million pounds, this would amount to payments of nearly $11,000, the Farm Bureau projected.
As an added incentive for enrollment, the USDA announced Wednesday it would begin issuing checks for the February and March margins on June 1.
Assistance may also be available this year at the state level. According to an agreement reached during this legislative session between Gov. Scott and agricultural leaders in the General Assembly, the state may provide a minimum of $600 toward insurance premiums for those who enroll, though details need to be worked out.
Nate Miller of Kettle Top Farm in Weybridge signed up for the program after the changes were made, once he knew what to expect, he told the Independent.
Miller, who milks 30 cows, has received a modest return on his investment so far — about $150 — but at the coverage level he signed up for he doesn’t expect to receive more than a few dollars by July.
“If you don’t play the game you’re at a disadvantage,” he acknowledged.
While he welcomes the payment, he points out that the fact such insurance is needed is an indication that the dairy market is still not doing well.
“If the program pays out, in the end that’s a bad thing,” Miller said.
Milk prices have declined nearly 40 percent since 2014 to a point that falls well below break-even for some small- and medium-size Vermont operations.
Loren Wood of Woodnotch Farm in Shoreham was thinking of those operations when he spoke to the Independent last week.
“What bothers me the most about these changes is that it’s too late for a bunch of people” he said, referring to operations like Nordic Farms in Charlotte and Windy Acres Farm in Swanton — two dairy operations that recently closed up shop and auctioned off their assets.
Wood, who milks about 475 cows, said he recently signed up for the new program, in spite of his past experiences with it.
In 2015 he paid about $6,500 in premiums for the program but received no payments. Even after that initial loss, he was required by the program’s original rules to pay an annual $100 administrative fee through 2018.
He said he was encouraged by the numbers he was getting from his dairy co-op, Agri-Mark, which suggested that farmers would see a return on investments in the higher-premium end of the program.
“It’s going to help us some, but it won’t be that much of a shot in the arm,” he said.
Some say that not only has MPP-Dairy failed to support farmers, but it has contributed to their losses.
“In its first two years of operation, (U.S.) farmers paid $96 million in fees and premiums but only $12 million was paid in ‘indemnities,’” wrote Andrew Novakovic, a Cornell University professor of Agricultural Economics, and Mark Stephenson, the director of dairy policy analysis at the University of Wisconsin, in a February briefing paper.
In Vermont, according to the USDA, overall participation in MPP-Dairy decreased by 21 percent over three years, from 588 in 2015 to 465 in 2017, and the number of operations signed up at the $6 or higher margin level decreased by 98 percent, from 358 to eight.
Novakovic and Stephenson point out that efforts by industry advocates and sympathetic legislators to make the program more helpful to dairy farmers have proven very difficult, not least because such changes would necessarily make the program more expensive. They do suggest the program is now “sufficiently improved to more than justify giving it a hard look.”
Dairy farmers should get in touch with their county Farm Service Agency as soon as possible, said Wendy Wilton, executive director of Vermont’s FSA. There they can find help navigating the numbers and making a decision.
As of May 22, according to Wilton’s office, 28 of 48 eligible farmers in Addison County had enrolled in the program — a rate slightly higher than in the rest of the state — but she expects the county service center in Middlebury will be hearing from more people as the deadline approaches, especially after the April margin number is released May 30.
In a May 18 press release Sen. Leahy exhorted farmers to sign up.
“Whether you have 30 cows or 330, the forecasts from USDA are clear that you should sign up at the top level of $8, where lower premiums that I was able to secure are now less than the 15 cents per cwt farmers pay for the Dairy Checkoff and promotion program.”
Reach Christopher Ross at [email protected].
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