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Dairy Focus: MILC Program Renewed

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J.W. Schroeder, NDSU Extension Service dairy specialist J.W. Schroeder, NDSU Extension Service dairy specialist
The reauthorized Milk Income Loss Contract Program has some new provisions.

By J.W. Schroeder, Dairy Specialist

NDSU Extension Service

The Milk Income Loss Contract Program (MILC) announced on Dec. 22, 2008, will be of interest to dairy producers in the coming year. The MILC program was renewed in the recent 2008 Farm Bill with a provision that raises the MILC target price when dairy feed prices are high.

Not since February of 2007 has the payment calculator kicked in. With the steep decline in dairy prices and the addition of the monthly feed cost adjuster, it is very likely that payouts from the MILC Program will be triggered in the coming months.

According to the recent U.S. Department of Agriculture Farm Service Agency announcement, sign-up for the Milk Income Loss Contract Program began Dec. 22 and will continue through the program’s expiration date, Sept 30, 2012.

The 2008 Farm Bill (which went into effect Oct. 1, 2008) reauthorizes the MILC Program, which operates similarly to the counter-cyclical payment program for crops but makes three key changes in program operation. Under the 2008 act, the MILC payment rate and the per-operation poundage limit are modified, depending on when the milk is produced.

In addition, a “feed cost adjuster” is introduced for the life of the 2008 act. It adjusts the $16.94-per-hundredweight (cwt) benchmark price upward depending on the cost of feed rations. When available, MILC payments are based on a payment rate percentage that is multiplied by the difference between a now-flexible target ($16.94 per cwt or higher) and the specific month’s Boston Class I price of milk.

Dairy producers could begin signing up for the renewed program as of Dec. 22; however, there has been some confusion about the new rules for MILC. According to the National Milk Producers Federation, here are some new features that dairy producers should be aware of:

  • If your dairy has more than $500,000 in nonfarm adjusted gross income, you are not eligible for payments.
  • Documentation of income will be required. You should visit with your local Farm Service Agency (FSA) office about the paperwork needed prior to filing for MILC.
  • The cap on milk production has been raised from 2.4 million pounds to 2.98 million pounds per operation per fiscal year.
  • A “feed cost adjuster” can raise the $16.94 target for the Class I price in Boston, depending on feed cost.

For more information on the adjuster, a Web site is available to help you determine MILC payment rates. At the “Understanding Dairy Markets” Web site, maintained by the University of Wisconsin Dairy Marketing and Risk Management Program, you will find links to information about the MILC program. The site also includes a spreadsheet model that you can use to calculate the MILC program’s “feed cost adjuster,” as well as access to documents such as the Farm Service Agency’s 114-page 2008 MILC handbook. The handbook describes the program’s provisions, eligibility requirements and sign-up requirements, and how to compute payments. Just use your search engine of choice and enter background material for the MILC Program or enter this address - http://future.aae.wisc.edu/milc.html - in your browser.

To estimate your MILC payments, visit the National Milk Producers Federation Web site at http://www.nmpf.org/milk_pricing/milc_payments. Estimated payments will be updated each week. Links to these and other related Web sites also are available on my Web site at http://www.ag.ndsu.nodak.edu/aginfo/dairy/Economics/index.htm.

Under the renewed MILC Program, payments can be available for up to nearly 3 million pounds (about 145 cows) for each fiscal year. A final MILC payment rate (applicable to the prior month) will be posted at the FSA Web site the last day of each month.

The announcement also specifies that producers submitting contract applications after Jan. 21, 2009, will not have the option of selecting an earlier month as the payment start month for the dairy operation for a fiscal year. Producers also will be limited to applicable start month selection rules.

Those general rules are that the start month either must be the month the contract is submitted or some later month. Changes in the month may be made from year to year as long as the designation is made by the 14th of the month proceeding the new start month. Pound limits run from the start month and all pounds for which payment is received count against the limit for that fiscal year.

Eligible dairy producers are those who commercially produce milk in the United States. To receive program approval, producers must enter into a MILC contract with the Commodity Credit Corp. and provide monthly milk marketing data. Dairy producers can apply for MILC at local FSA offices.


NDSU Agriculture Communication

Source:J.W. Schroeder, (701) 231-7663, jw.schroeder@ndsu.edu
Editor:Ellen Crawford, (701) 231-5391, ellen.crawford@ndsu.edu
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