Dairy producers still have time to enroll in the dairy Margin Protection Program for coverage in 2016 and can use an online tool developed by dairy economists with the College of Food, Agricultural, and Environmental Sciences at The Ohio State University to aid in their decision-making.
Cameron Thraen, emeritus professor and formerly an associate professor in the college’s Department of Agricultural, Environmental, and Development Economics, and John Newton, formerly a Ph.D. graduate student working with Thraen and now senior director, Economic Research, National Milk Producers Federation, collaborated with members of the Dairy Markets and Policy (DMaP) team in 2014 to create the online decision tool.
Thraen and Newton, working with a team of dairy economists from the University of Wisconsin, the University of Minnesota, Michigan State University, Cornell University and The Pennsylvania State University developed the web-based decision support tool and the educational programming materials for the USDA Farm Services Agency Margin Protection Program (MPP).
The deadline to enroll in the MPP was extended to Nov. 20 to help accommodate farmers busy with harvesting, according to U.S. Agriculture Secretary Tom Vilsack.
“The fall harvest is a busy time of the year for agriculture, so this extension will ensure that dairy producers have more time to make their choices,” Vilsack said in a written statement. “We encourage all operations to examine the protections offered by this program, because despite the very best forecasts, markets can change.”
MPP is a new voluntary dairy safety net program created by the 2014 Farm Bill that provides financial assistance to participating farmers when the margin — the difference between the U.S. All Milk Price and calculated feed costs — falls below the coverage level selected by the farmer.
Therefore, the more time producers have to make a decision on their participation level, the better they’ll be able to make the most informed choice, Thraen said.
“The dairy market is pretty volatile, so another week, gives more time for the online decision tool to track out the direction in which the margin (milk price versus cost to feed) will trend in 2016,” he said. “The more hard data producers have at their disposal, the better.
“It is in a producer’s interest to wait as long as possible before they make program decisions.”
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, Thraen said.
Recently the tool added an advanced feature, one that lets a dairy farmer use her or his own farm milk production, milk price, feed cost, and financial data to customize the decision framework and stress-test their dairy business, he said.
“This feature can be found on the online decision tool in the upper left section,” Thraen said. “The DMaP website has complete details on the use of the advanced feature.
“Producers who feel that the national data does not reflect their own business experience can use this advanced feature to their advantage.”
Currently the online decision tool forecast shows a margin for 2016 that will be above the long-term average, he said.
“In great part this is due to very strong demand for cheese and butter here at home,” Thraen said. “However, world dairy markets are volatile, and any decline in the U.S. All Milk Price in the coming weeks could send the dairy margin tumbling.
“Ohio dairy farmers need to monitor international dairy prices as well as the continued strength in U.S. domestic demand in the coming weeks. A critical period will be just prior to the decision deadline of Nov. 20.”