MPP, DMC, LGM Dairy and More Takeaways From The 2018 Farm Bill
As 2019 began, we got to start with some good news. The 2018 Farm Bill (2019-2023) will offer our dairy industry great opportunity. We know some of you may be thinking, “What do these guys know…anything?” However, with good management and control on capital expenditures, dairy farming will be good. Dairy farmers are finally going to have a true “safety net” related to margin over feed costs.
The Farm Bill increases the MPP (now DMC) margin over feed cost from $8.00 to $9.50 per hundred. The cost for this newprotection will be lower than the previous $8.00 program. This is true for up to five million pounds of your production. If you are over five million pounds, we can still help you as well!
The second, more important item is that you can also use one or both of the two dairy price management tools offered through crop insurance agents. There is the “new” Dairy Revenue Protection (DRP) plan and the Livestock Gross Margin (LGM). These products can and will effectively manage your volatility related to milk price changes. Both of these products are priced favorably, and to be frank, all dairy producers should be using one of these programs in addition to DMC. Our personal recommendation in most situations is LGM Dairy – if you want to talk about why, give us a call.
What should you do?
We encourage all of our dairy producers who chose LGM Dairy in 2018 to retroactively apply for their 2018 MPP benefit at the FSA. Please elect the highest margin available and get as close to 5 million pounds as possible without going over. This is extremely important, as all that purchased LGM Dairy will be paid. This seems too good to be true, but it isn’t! Additionally, all producers who purchased MPP in 2014 through 2017 get the option to get back a portion of their monies (don’t do this) or apply up to 75% of their prior payments to the new program (do this). If you are currently using LGM dairy we strongly recommend you stay the course. This is a very effective tool in managing your risk. Additionally, when possible, you should get into the FSA and sign up for the $9.50 margin on the first 5 million cwt (Tier 1) and $5.00 margin on the remaining milk (Tier 2).
Give us a call!
There are many details in the 2018 Farm Bill that will affect each farm a little differently. It is important to sit down with someone who has taken the time to evaluate how the Farm Bill will apply to your operation. We’ve done this and have also developed a study comparing LGM to Dairy RP. Give us a call to take a look and do some evaluation before you purchase.
ARM Services is always willing to help you with this important decision. We have developed an action/marketing plan to aid you in managing your risk related to the price of milk and feed costs. Make sure to contact us with your questions!