MPP deadline

A note about MPP from Dairy Herd Management:

While there was lots of publicity surrounding a request by Sen. Charles Schumer (D-N.Y.) for USDA to change the Margin Protection Program for Dairy (MPP-Dairy) premium payment system, USDA’s Farm Service Agency (FSA) is moving ahead based on current program requirements. That gives any dairy operations selecting buy-up coverage until June 1, 2015 to pay outstanding premiums.

Premium payment reminder letters will be mailed to affected dairy operations beginning May 1, according to a notice issued to state FSA offices. The letters will include the amount of outstanding premium due by June 1.

Under MPP-Dairy, dairy operations could pay 25% of margin insurance coverage premiums for calendar year 2015 last February, with the balance due June 1. According to USDA analysis, 13,860 dairy operations selected buy-up coverage, about 56% of all operations enrolling in MPP-Dairy.

 

Penalties severe

If premiums are not paid by June 1, those dairy farmers will remain legally obligated for the amount due. Their buy-up coverage will be lost, with 2015 coverage dropping to the catastrophic level ($4.00/cwt.) until the balance is paid in full.

If the outstanding premium is not paid by Sept. 1, 2015, the dairy operation will not be eligible for any coverage in the subsequent calendar year, and will not be able to receive the annual national production history upward adjustment. The operation remains legally obligated for the premium payment, and the annual $100 administrative fee for the duration of the five-year MPP-Dairy program.

After coverage is reduced to the catastrophic level, the original buy-up margin trigger level can only be regained when the premium is paid in full prior to Nov. 1, 2015, and only applies to remaining two-month payment periods in the calendar year. There will be no retroactive payments for pay periods already passed.

 

2016 enrollment

In addition to the premium payment letters, dairy farmers will also be receiving calendar year 2016 MPP-Dairy coverage selection letters by June 1. Dairy operations can select 2016 coverage levels and percentage of milk history to be covered, submitting that information to FSA between July 1 and Sept. 30, 2015.

Government Surprise

From Dairy Herd Management

Dairy farmers who qualified for a small Margin Protection Program for Dairy (MPP-Dairy) payment will get a little something extra – a civics lesson. That’s because when USDA’s Farm Service Agency (FSA) announced the payments for the January-February 2015 period, it included a reminder those payments are subject to budget sequestration, or a reduction of 7.3%.

In an Information Letter Series posted on the Dairy Markets and Policy website this week, Andrew M. Novakovic, University of Cornell dairy economist (a.k.a. civics teacher), reminded everyone of the origin of across-the-board sequestration that took effect Oct. 1, 2014. The letter, “Sequestration of USDA Expenditures in Fiscal Year 2015,” explains the process, and why it is in place now.

First, the numbers: Looking at the January-February 2015 MPP-Dairy pay period, any producer who insured a margin of $8.00/cwt. will receive a payment of $0.004456/cwt. on the portion of their milk production history they elected to cover. That’s not 45¢ per hundredweight, or 4.5¢ per hundredweight, but 0.4456¢ (45 hundredths of 1¢) – less than half of Abe Lincoln’s copper head per hundredweight.

According to USDA analysis, 261 dairy producers insured about 58% of their 1 billion lbs. of milk at the $8/cwt. level. Under the MPP-Dairy program, the eligible milk production history for these producers (about 1 billion lbs. X 58% = 583 million lbs.) is divided equally over six 2-month pay periods, making 97.2 million lbs. (972,000 hundredweights) eligible for the 0.4456¢/cwt. payment for the January-February pay period. That adds up to about $4,330 in total payments – divided by 261 producers nationally – for this pay period.

Novakovic estimated a dairy farmer insuring 4 million lbs. of milk annually at the $8.00/cwt. margin level would have received $29.73 this pay period. With the largely forgotten budget reduction maneuver – sequestration – the payment is reduced $2.17, to $27.56.

MPP Payments

An article in Dairy Herd Management.

A small number of U.S. dairy operations could receive Margin Protection Program for Dairy (MPP-Dairy)payments beginning this week, according to the USDA Farm Service Agency (FSA).

MPP-Dairy payments are triggered when the national average margin, the difference between the price of milk and the cost of feed, falls below a producer-selected margin trigger, ranging from $4 to $8/cwt., for a specified consecutive 2-month period. Final USDA prices for milk and feed components required to determine the national average margin for the January-February 2015 period were released on March 30.

January 2015 margin calculations:

  • Corn: $3.81/bushel
  • Soybean meal: $380.02/ton
  • Alfalfa hay: $174/ton
  • Final feed costs: $9.26/cwt.
  • All-milk price: $17.60/cwt.
  • Milk margin minus feed costs: $8.3356/cwt.

February 2015 margin calculations:

  • Corn: $3.79/bushel
  • Soybean meal: $370.38/ton
  • Alfalfa hay: $172/ton
  • Final feed costs: $9.14/cwt.
  • All-milk price: $16.80/cwt.
  • Milk margin minus feed costs: $7.655395/cwt.

Combined, the January-February MPP-Dairy pay period margin is $7.99554/cwt., resulting in an MPP payment rate of $0.004456/cwt. (just over four-tenths of 1¢/cwt.) for dairy operations selecting an $8/cwt. margin trigger coverage level for 2015.

According to data released by USDA on April 9, of nearly 24,748 dairy operations selecting MPP-Dairy coverage, just 261 selected the $8.00/cwt. margin coverage level for 2015, with a total maximum annual milk production history of just over 1 billion pounds. Production history was based on the highest annual production over a three-year period, 2011-2013.

Based on analysis by Marin Bozic, Assistant Professor, Department of Applied Economics with the University of Minnesota-Twin Cities 26% of expected 2015 milk production has MPP-Dairy coverage at $4.50/cwt. or higher, but only 10.3% has a coverage at $6.50/cwt. or higher.

In addition to margins, producers selected the percentage – between 25% and 90% – of their annual milk production history to be covered. Nationally, at the $8/cwt. coverage level, those dairy operators elected to cover about 58% of their annual milk production.

Under the MPP-Dairy program, the eligible milk production history for these producers (about 1 billion pounds X 58% = 583 million pounds) is divided equally over six 2-month pay periods, making 97.2 million pounds (972,000 hundredweights) eligible for the 0.45¢/cwt. payment for the January-February pay period. That adds up to about $43,300 in total payments.

Not only will MPP-Dairy payments be small, but they are also subject to federal budget sequestration, reduced by 7.3%, according to the FSA notice.

Qualifying producers paying the full margin insurance premium in-full will receive a payment based on the amount of covered production history elected by the dairy operation. If the premium has not been paid in-full, payments will apply to the outstanding premium balance remaining for buy-up coverage, thus reducing the premium needed to pay by June 1.

USDA issued payment processing instructions to state and county FSA offices on April 10. Those offices were to begin processing payments to eligible producers on April 13.

Of the 261 selecting the $8/cwt. margin coverage, about two-thirds (171) are in just five states: Wisconsin (69); Minnesota (35); New York (28); Pennsylvania (20); and Michigan (19).

Based on current projections, there’s a chance dairy producers covered at the $8/cwt. margin level may also see a small payment for the March-April payment period

However, while those electing the $8/cwt. margin level will be seeing small payments in 2015, the added protection appears costly. In addition to a $100 administration fee paid by all dairy operations participating in MPP-Dairy, buying any coverage above $4/cwt. included additional premium payments.

At the $8 level, insurance premiums were 47.5¢/cwt. on the first 4 million pounds of milk production per year; and $1.36/cwt. on any insured milk above 4 million pounds/year. Premiums were discounted 25% in 2014 and 2015 on covered annual farm production volumes up to 4 million pounds.

2015 MPP-Dairy, by coverage level

 

Selected

 Margin

 Coverage

Dairy

 Operations

 selecting level

Milk production

 history

Average milk

 Production

 covered

2015 milk

 production

 eligible

 ($/cwt.)

(Number)

(Million pounds)

(Percent)

(Million pounds)

$4.00

10,888

97,091.3

90.0%

87,382.1

$4.50

136

481.8

88.5%

426.4

$5.00

741

6,534.3

88.0%

5,747.4

$5.50

505

2,802.8

84.5%

2,367.9

$6.00

3,828

29,584.1

83.1%

24,591.1

$6.50

6,457

22,305.7

76.7%

17,119.3

$7.00

502

1,007.4

82.0%

825.9

$7.50

1,430

4,228.5

71.4%

3,019.6

$8.00

261

1,007.0

57.9%

583.3

Total

24,748

166,318.9

85.4%

142,063.1

Source: USDA

We don’t need labels on genetically modified foods

An article in the Washington Post

E IGHTY-EIGHT percent of scientists polled by the Pew Research Center in January said genetically modified food is generally safe to eat. Only 37 percent of the public shared that view. The movement to require genetically modified food products to be labeled both reflects and exploits this divergence between informed opinion and popular anxiety.

Mandated labeling would deter the purchase of genetically modified (GM) food when the evidence calls for no such caution. Congress is right to be moving toward a more sensible policy that allows companies to label products as free of GM ingredients but preempts states from requiring such labels.

Lawmakers and voters in some states have considered requiring GM labeling, but only a few have chosen to label, and none have yet started. That’s good: The GM-food debate is a classic example of activists overstating risk based on fear of what might be unknown and on a distrust of corporations. People have been inducing genetic mutations in crops all sorts of other ways for a long time — by, for example, bathing plants in chemicals or exposing them to radiation. There is also all sorts of genetic turbulence in traditional selective plant breeding and constant natural genetic variation.

Yet products that result from selective gene splicing — which get scrutinized before coming to market — are being singled out as high threats. If they were threatening, one would expect experts to have identified unique harms to human health in the past two decades of GM-crop consumption. They haven’t. Unsurprisingly, institutions such as the National Academy of Sciences and the World Health Organization have concluded that GM food is no riskier than other food.

Promoters of compulsory GM food labeling claim that consumers nevertheless deserve transparency about what they’re eating. But given the facts, mandatory labeling would be extremely misleading to consumers — who, the Pew polling shows, exaggerate the worries about “Frankenfood” — implying a strong government safety concern where one does not exist. Instead of demanding that food companies add an unnecessary label, people who distrust the assurances that GM food is safe can buy food voluntarily labeled as organic or non-GM.

This isn’t just a matter of saving consumers from a little unnecessary expense or anxiety. If GM food becomes an economic nonstarter for growers and food companies, the world’s poorest will pay the highest price. GM crops that flourish in challenging environments without the aid of expensive pesticides or equipment can play an important role in alleviating hunger and food stress in the developing world — if researchers in developed countries are allowed to continue advancing the field.

A House bill introduced last week would facilitate a voluntary labeling system and prevent states and localities from going any further to indulge the GM labeling crowd. It would also empower the Food and Drug Administration to require labels on GM products that materially differ from their non-GM cousins in ways that can affect human health. Yes, food industry interests back the bill. That doesn’t make it wrong.