January 15, 2009

Changes Made in Milk Income Loss Contract (MILC) Program

Gary Kittle, director of the Scotland County Farm Service Agency (FSA) announced that signup for the Milk Income Loss Contract Program (MILC) began on December 22 and will continue through the program’s expiration date, September 30, 2012.

The 2008 Farm Bill reauthorizes the MILC Program and makes three key changes in program operation according to Kittle.

“Under the 2008 Act, the MILC payment rate and the per-operation poundage limit are modified, depending on when the milk is produced,” said Kittle. “In addition, there is now a ‘feed cost adjuster’, which 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.”

USDA’s Commodity Credit Corporation (CCC) issues MILC payments on an operation-by-operation basis up to a maximum of 2.4 million pounds of milk produced and marketed from October 1, 2007, through September 30, 2008. The production limit per operation increases to 2.985 million pounds for each fiscal year from Oct. 1, 2008, through Aug. 31, 2012. The production limitation reverts back to the original limit of 2.4 million pounds per fiscal year in September 2012.

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 (calculated from the “entire month” prices published by the National Agricultural Statistics Service) is greater than $7.35 per cwt. beginning January 1, 2008, through August 31, 2012. Calculations from January 1, 2008, through August 31, 2012, will be made at 45 percent of the percentage that the National Average Dairy Feed Ration Cost exceeds $7.35 per cwt.

“The MILC program also made a change to producer eligibility requirements,” Kittle said. “Beginning October 1, 2008, the 2008 Act made changes to the provisions for payment eligibility to add an adjusted gross income (AGI) limit. This means if the individual or entity has annual non-farm AGI for the relevant base period greater than $500,000, the individual or entity will not be 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. All payments in the program are subject to limits in the contract, regulations, and to changes in statutory provisions for payment.

Dairy producers can apply for MILC at the Scotland County FSA Office on East Highway 136, Memphis. For more info on MILC call (660) 465-8517 or visit www.fsa.usda.gov.

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