Updated with comment from the National Milk Producers Federation.

Dairy farms participating in the Margin Protection Program can now update their production history when an eligible family member joins the operation. The voluntary program, established by the 2014 Farm Bill, protects participating dairy producers when the margin – the difference between the price of milk and feed costs – falls below levels of protection selected by the applicant.

Farmers participating in the Margin Protection Program can update their production history when an eligible family member joins the operation. (Photo: Dmitry Kalinovsky/Thinkstock)

"This change not only helps to strengthen a family dairy operation, it also helps new dairy farmers get started in the family business, while ensuring that safety net coverage remains available for these growing farms," said Agriculture Secretary Tom Vilsack. "When children, grandchildren or their spouses become part of a dairy operation that is enrolled in MPP, the production from the dairy cows they bring with them into the business can now be protected."

The U.S. Department of Agriculture's (USDA) Farm Service Agency (FSA) published a final rule that makes these changes effective on April 13, 2016. Any dairy operation already enrolled in the Margin Protection Program that had an intergenerational transfer occur will have an opportunity to increase the dairy operations production history during the 2017 registration and annual coverage election period. The next election period begins on July 1, 2016, and ends on Sept. 30, 2016. For intergenerational transfers occurring on or after July 1, 2016, notification must be made to the FSA within 60 days of purchasing the additional cows. Each participating dairy operation is authorized one intergenerational transfer at any time of its choosing until 2018.

Insurance coverage

For $100 a year, dairy producers can receive basic catastrophic protection that covers 90% of milk production at a $4 margin coverage level. For additional premiums, operations can protect 25 to 90% of production history with margin coverage levels from $4.50 to $8, in 50 cent increments. Annual enrollment in the program is required in order to receive margin protection. The final rule also provides improved risk protection for dairy farmers that pay premiums to buy-up higher levels of coverage by clarifying that 90% of production is covered below the $4 level even if a lower percentage was selected above the $4 margin.

Earlier this year, FSA gave producers the opportunity to pay their premium through additional options including via their milk cooperative or handler. This rule facilitates those options and also clarifies that the catastrophic level protection at $4 will always cover 90% of the production history, even if a producer selected a less than a 90% percentage for the buy-up coverage.

“We very much appreciate these steps by USDA to implement administrative changes that will improve the program’s usefulness to dairy farmers,” said Jim Mulhern, president and CEO of NMPF.  “USDA is constrained in what it can do to strengthen MPP, but the program must continue to evolve based on the experiences of NMPF’s members and others in the dairy industry.”

Assuming current participation, had the Margin Protection Program existed from 2009 to 2014, premiums and fees would have totaled $500 million while providing producers with $2.5 billion in financial assistance, nearly $1 billion more than provided by the old Milk Income Loss Contract program during the same period.

For more information, visit FSA online at http://www.fsa.usda.gov/dairy or stop by a local FSA office and ask about the Margin Protection Program. To find a local FSA office in your area, visit http://offices.usda.gov.