After a long stretch of tough times, dairy producers have finally enjoyed a nice run of profitability.
“The dairy supply is tight and any shifts in demand mean a significant impact on prices,” said Cameron Thraen, a dairy economist with Ohio State University’s College of Food, Agricultural, and Environmental Sciences in today’s 2015 Agricultural Policy and Outlook Conference. “Prices are coming off records and they are going to fall. Once again high prices will cure high prices, but feeding costs are down dramatically, so income over feed costs will keep returns to the dairy industry strong.”
Cheese, exports, international politics, and domestic demand will all be very important moving forward for dairy profitability. In addition, dairy producers have new options to consider in the farm bill. After an extension in the deadline, time is once again running out for dairy producers to make a farm bill decision for the Dairy Margin Protection Program (MPP). The deadline was extended to Dec. 5, 2014.
Dairy producers need to carefully consider this important decision that has been the subject of numerous joint educational meetings and an online decision tool to evaluate the costs of different coverage options. The new online tool designed to assist dairy producers in understanding coverage options under the new farm bill was developed in part by Thraen said. He worked with a team of researchers from the University of Illinois, the University of Wisconsin, the University of Minnesota, Michigan State University, Cornell University and The Pennsylvania State University to develop the web-based decision support tool for MPP. The MPP online tool can be accessed on the following websites: www.fsa.usda.gov/mpptool, www.dairymarkets.org/MPP, and www.farmdoc.illinois.edu/farmbilltoolbox.
The four-step tool is easy to use, Thraen said. The tool helps producers calculate total premium costs and administrative fees associated with the program, as well as forecast MPP payments that will be made during the coverage year and the total MPP benefit that the producer can anticipate, he said.
To accompany the tool, the researchers have also developed a series of online educational resources and they will host a number of workshops around the country to train producers and educators on how to use the decision tool. In using the MPP online tool, producers can also access a tool to make decisions regarding the Livestock Gross Margin-Dairy insurance program, also in the farm bill, Thraen said.
“The new Margin Protection Program should be viewed as new opportunity to effectively and affordably manage farm income volatility and market risk, and to avoid the catastrophic financial outcomes that played out in 2009 and again in 2012,” he said. “In creating MPP, the 113th Congress understood that the key to success for this program will be in providing all of the nation’s dairy farmers open access to up-to-the minute margin forecasts and timely market information on the future direction of milk and feed prices to help with making sound MPP and LGM-Dairy decisions.
“This is precisely what our research program here at Ohio State has created and the product of that research forms the basis for linking feed and milk prices with state-of-the-art forecasting techniques.”
MPP took effect on Sept. 1 and program enrollment began Sept. 2. With the passage of the most recent farm bill, the U.S. federal dairy farm safety net underwent the most comprehensive reform that the program has seen in decades, Thraen said.