While the 2009 milk price outlook looks bleak, there is some comfort in the reauthorization of the Market Income Loss Contract Program (MILC) and the three new changes in the program.
These changes included modification to the MILC payment rate and per-operation poundage limits as well as the addition of a feed cost adjuster.
The 2008 Farm Bill reauthorized the MILC Program and operates similarly to the counter-cyclical payment program for crops. 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. USDA’s Farm Service Agency issues MILC payments on an operation-by-operation basis up to a maximum of 2.4 million pounds of milk produced and marketed (about 120 cows) from October 1, 2007, through September 30, 2008. The production limit per operation increases to 2.985 million pounds (about 145 cows) for each fiscal year.
The 2008 Act adjusts the trigger price of $16.94 cwt., depending on the extent to which feed costs increase. The feed cost adjustment takes effect when the monthly National Average Dairy Feed Ration Cost greater than $7.35 per cwt. beginning Jan. 1, 2008, through Aug. 31, 2012. Calculations from Jan. 1, 2008, through Aug. 31, 2012, will be made at 45 percent of the percentage that the National Average Dairy Feed Ration Cost exceeds $7.35 per cwt.
Beginning with Fiscal Year 2009 marketings, which started Oct. 1, 2008, the 2008 Act made changes to the provisions for payment eligibility to add an adjusted gross income (AGI) limit. If the individual or entity has annual non-farm AGI for the relevant base period greater than $500,000, the individual or entity is not eligible for MILC benefits. The base period will be set pursuant to AGI regulations yet to be issued. That rule will also define what is considered to be non-farm income.
During the signup application period, participating dairy operations must select the month of the fiscal year to start receiving payments for eligible production. Producers submitting a contract application within 30 days of the beginning of the application period can select any preceding month as the start month. 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; and will be limited to applicable start month selection rules. Those general rules are that the start month must either be the month the contract is submitted or some later month. Changes in the month may be made from year to year so long as the designation is made by the fourteenth 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 CCC and provide monthly milk marketing data. Dairy producers can apply for MILC at local FSA offices.