Extension agent discusses dairy risk strategies in SE
SLEEPY EYE — University of Minnesota Extension Agent Nate Hulinsky presented the latest information on dairy risk management strategies to a roomful of farmers in the University of Minnesota Extension Service/Brown County office Monday.
The 2018 Farm Bill reauthorizes all programs administered by the Farm Service Agency (FSA) and modifies most of them. Most of the programs are authorized through 2023.
The Dairy Margin Coverage Program (DMC) replaced the Margin Protection Program for Dairy (MPP).
“Most dairy programs insure a ‘margin,’ typically the difference between milk price and feed cost at fixed premiums. The signup period was moved back to June 17 and continues for 90 days. Participation is retroactive to January,” Hulinsky said.
Operations who make a one-time election to participate in DMC from enrollment through 2023 are eligible for a 25 percent existing margin coverage rate discount. The maximum level for operations with covered production history of less than five million pounds increased to $9.50.
The DMC reduces most Tier 1 premiums by 70 percent.
Operations may annually elect to receive coverage on a percentage of the operation’s production history in five percent increments, not to exceed 95 percent. The 25 percent minimum coverage percentage no longer applies.
A dairy operation enrolled in MPP any year from 2014-2017 may be eligible for a premium refund if the premiums paid exceed the MPP payments received.
Producers enrolled in the Livestock Gross Margin for Dairy Cattle program (LGM) in 2018 may enroll in 2018 MPP retroactively.
Dairy Revenue Protection (RP) is a new insurance program that protects dairy revenue calculated by class or component pricing using put options. Premiums are updated daily.
Dairy farmers can choose the class or component method to value milk, the amount of milk production to cover, the coverage level for revenue guarantee, what protection factor they want and which quarterly contracts to purchase.
Hulinsky said there are a large number of choices with quarterly decisions. Historically, buying the furthest-out contracts result in a higher probability of net gain payout and being informed is the key to making decisions.
“We have the tools with access to use including agent locators,” Hulinsky said. “Having a marketing plan will be the key to success.”
For more information on USDA-RMA, visit https://www.rma.usda.gov/en/Topics/Dairy-Revenue-Protection; https://wwwrma.www.rma.usda.gov. For Rice Dairy Risk Services, visit https://quotes.ricedairyrs.com/.
Fritz Busch can be emailed at fbusch@nujournal.com.