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Will the MPP Program for 2016 Decline?
August 28, 2015

If you want to know what dairy farmers are thinking, ask them. Last week, we placed a poll click HERE , asking about 2016 Dairy Margin Protection Program participation. (Note: If you haven’t taken the survey,   there’s still time.)

Needless to say, we got an earful. Some of the responses were unfit to print in a family publication such as Dairy Today. Others were more thoughtful.

The poll was unscientific—anyone clicking HERE could participate. Attitudes, of course, could change as futures markets fluctuate and the September 30 deadline approaches. Consequently, the results have to be taken with a grain of salt.

Nevertheless, the results were interesting from the 100 or so responses we received. Farmers from 27 states responded, with about half of those coming from the Midwest, a fourth from the Northeast and a fifth from the West.

Roughly 70% of survey respondents say they participated in the MPP program last year. About 28% of those who participated say they will not participate again in 2016 (even though, under the rules, they are now enrolled for the life of the program).

Of those who will again participate in the MPP in 2016, roughly 40% will sign-up for the same coverage level as 2015. But 50% will reduce their coverage level—many, though not all, to the $4 catastrophic level. The remainder will actually increase their coverage level—some from $4 to $6 or $6.50.

It’s an understatement that some farmers were disappointed in the MPP last year. Says one Washington farmer, who milks between 1,000 and 2,000 cows, “I believe we were all over sold on the program. I regret the decision!”

And a New York farmer, who milks between 100 and 249 cows, says: “This program was a complete waste of money and time. Should have known it wouldn’t work and I’m wondering what the government will be doing with all the premium money it collected.”

But others were more measured:

“We will not know the effectiveness of this program until we experience really low margins,” says a Wisconsin farmer with 100 to 249 cows.

Adds this Colorado farmer with more than 2,000 cows: “Seems to be good catastrophic insurance that is reasonably priced if you select the correct coverage.”

From my reading of the survey comments, most of those who were disappointed with MPP didn’t fully understand it. First and foremost, the MPP was designed as a risk management program. Each farm is different; each farm has its own risk profile.

To better understand that, see the yes or no story on Dairy Today.   Dairy economists have come up with an advanced decision toll (click HERE) to help farmers assess their level of risk. The decision tool takes into account your cow numbers, milk per cow, expenses, risk management tools employed, working capital per cow and debt-to-asset ratio.

Using the tool, say economists, will allow farmers to make a reasoned decision on whether to participate in the MPP, and at what levels if they decide to.

Source – Dairy Today


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