Wednesday, September 7, 2016

Dairy margins


USDA Announces Safety Net Assistance for Milk Producers Due to Tightening Dairy Margins

Washington-A narrowing margin between the price of milk and the cost of feed triggered assistance through the Farm Bill's dairy margin protection program.

This past summer here in Idaho and nationwide, average dairy margins were below $6 per hundred weight. In other words, for every 100 gallons of milk a dairy producer sells, dairymen pocketed less than $6.

"The decline in dairy farm revenue has led many dairy farm families to exit the industry,” American Farm Bureau President Zippy Duvall wrote. "In 2015 we lost 1,225 dairy farms-many of those small dairy farm operations where the average herd size is fewer than 200 milking cows.”

Agriculture Secretary Tom Vilsack wants at least $11.2 million in financial assistance to American dairy producers enrolled in the 2016 Margin Protection Program for Dairy. 

The payment rate for May/June 2016 will be the largest since the program started in 2014.

"We know the nation's dairy producers are experiencing challenges due to market conditions," said Vilsack. "MPP-Dairy payments are part of a comprehensive farm safety net that help to provide dairy producing families during tough times.”

 Dairy operations enrolled in the 2016 MPP-Dairy program will get $11.2 million this month.

“I want to urge dairy farmers to use this opportunity and look over enrollment options for 2017, that enrollment period is currently scheduled to end Sept. 30, 2016. By supporting a strong farm safety net, expanding credit options and growing domestic and foreign markets, USDA is committed to helping America's dairy operations stay successful,” added Vilsack.

Dairy farmers that enrolled at the $6 through $8 margin trigger coverage level will receive payments. MPP-Dairy payments are triggered when the national average margin, thats the difference between the price of milk and the cost of feed, falls below a level of coverage selected by the dairy producer between $4 to $8, for a specified consecutive two-month period. All final USDA prices for milk and feed components required to determine the national average margin for May/June 2016 were released the last of July.

The national average margin for the May/June 2016 two-month consecutive period is $5.76277 per hundred weight (cwt.), resulting in the following MPP payment rates:

Margin Trigger Coverage Levels
Payment Rate/cwt.
$6.00
$0.23723

$6.50
$0.73723

$7.00
$1.23723

$7.50
$1.73723

$8.00
$2.23723

US dairy farmers have slowly adopted USDA-sponsored tools to manage market price risk, due to the cost, but also because benefits are less attractive to some producers. In 2015, just 25,000 of the 45,000 US dairy farms signed up for the 2014 Farm Bill Margin Protection Program and only 23,000 farmers enrolled this year, a majority of them for catastrophic coverage only.

Duvall said AFBF was appreciative of USDA's deadline extension to sign-up for MPP as well as the expansion of a farm's production when new family members join the business. He said the AFBF also believes the $11.2 million in MPP assistance announced in August will help, but more can be done. Duvall asked USDA to buy additional dairy products to be used in USDA's nutrition programs and for donations to food banks.

"Specifically, we think cheese could be purchased in a quantity that would help the dairy industry and yet not negatively impact our exports of cheese products," Duvall said. "If the Department spent $50 million, it could purchase 28 million pounds of cheese for domestic feeding programs. This would not only be beneficial to those in need of food, but also would help reduce the record high inventories and would provide a positive price impact for dairy producers.”

The U.S. Department of Agriculture announced August 25th to purchase approximately 11 million pounds of cheese from private inventories to assist food banks and pantries across the nation, while reducing a cheese surplus that is at its highest level in 30 years. The purchase, valued at $20 million, will be provided to families in need across the country through USDA nutrition assistance programs, while assisting the stalled marketplace for dairy producers whose revenues have dropped 35 percent over the past two years.


"We understand that the nation's dairy producers are experiencing challenges due to market conditions while food banks see strong demand for assistance," said Secretary Vilsack. "This commodity purchase is part of a comprehensive safety net that’ll help reduce a cheese surplus thats at a 30-year high while, at the same time, moving a high-protein food to the tables of the  needy.”

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