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Budget deal: What you need to know

Tuesday, March 13, 2018   (0 Comments)
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By Aaron Stauffacher, associate director of government affairs

The short-term federal budget agreement approved in early February included specific language helpful to dairy farmers.

The agreement allocates more than $1 billion to improve the Dairy Margin Protection Program (MPP) and removes the $20 million enrollment cap for the Livestock Gross Margin for Dairy (LGM-D).

MPP, which was created by the 2014 farm bill, has not been the risk management solution dairy farmers wanted. Lawmakers have sought to improve the program. However, the price tag to make those changes posed a high hurdle for Congress. Attaching it to a bill that needed to be passed became the vehicle for the dairy risk management improvements outlined below.

  • Increases Tier I MPP coverage to 5 million pounds of production. Formerly capped at 4 million, the increase makes the first 5 million pounds of production eligible for reduced premium at higher coverage options. This increase is more representative of the average size dairy farm (about 200 cows).
  • Dramatically reduces premium rates for Tier I coverage to make those higher options of margin coverage more affordable. See chart.

  •  Changes the bi-monthly margin calculation to a monthly calculation to better reflect fluctuations in the marketplace and trigger payments more frequently.
  • Waives the administrative fees for some eligible farmers (i.e. beginning farmers and those who are underserved).
  • Allows farmers up to 90 days to revisit their 2018 MPP coverage decisions and either sign up for or change coverage for 2018 based on these changes.
  • Removes the $20 million cap on LGM-D allowing more producers to use that program to diversify their risk management strategies.
  • Removes limiting barriers for developing new dairy insurance tools going forward so new risk management tools can be created.

Edge recognizes that MPP has not worked for our dairy farmers. After several years of paying into the program with little to show for it, our farmers have lost confidence. We hope these changes will make the program more worthwhile for some dairy farmers. Still, MPP is not the answer for everyone. Edge believes our dairy farmers need access to tools that best fit their farming and management style. Therefore, we are very pleased to see more dairy farmers will be able to utilize LGM-Dairy and other new tools are in the works.

These MPP fixes came before the farm bill, so there is lingering discussion about making additional fixes. It has been reported that House Agriculture Committee Ranking Member Rep. Collin Peterson, D-Minn., believes the changes do not go far enough and is working toward securing more in the farm bill. His proposal would reportedly allow farmers to extend insurance coverage on margins up to $9.50 from the current upper limit of $8 and provide reduced premiums on those increased margins for the first 5 million pounds of milk.

The congressional agriculture committees have yet to release their farm bill draft language.

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