MILC to offer ‘start month’ relief period

By Dave Natzke

USDA’s Farm Service Agency (FSA) released additional information regarding the Milk Income Loss Contract (MILC), promising a “start month” relief period for dairy farmers producing more milk than the MILC payment cap of 2.985 million lbs. per year. The length of the relief period will be announced later, according to a notice sent to state and county FSA offices.

Many of the details in the notice, sent Jan. 24, were already anticipated. As part of its “fiscal cliff” negotiations, Congress approved extension of MILC – which expired last fall – through Sept. 30, 2013. President Obama signed the American Taxpayer Relief Act of 2012 into law on Jan. 2, 2013. 

Under that law, virtually all dates in enabling law regarding MILC were changed from “2012” to ”2013”:

•  MILC payment formulas mirror the 2012 schedule. Payments will be calculated at the higher level – 45% of the difference between the federal order Class I base price trigger for Boston, Mass. ($16.94/cwt.) and the actual Class I price – until Aug. 31. Calculations revert to the lower 34% level in September 2013, and the program expires on Sept. 30.

• The National Average Dairy Feed Ration Cost (NADFRC) adjuster is $7.35/cwt. through Aug. 31, then rises to $9.50/cwt. for the final month of the program.

• The annual milk production cap eligible for payments is 2.985 million lbs. through Aug. 31, then drops to 2.4 million lbs. during September 2013. From October 2012 through August 2013 an operation may receive payments on marketings up to 2.985 million lbs. An operation is not eligible for a September 2013 payment if that operation has received MILC payments on more than 2.4 million lbs. before Sept. 1, 2013.

Since MILC contracts were automatically extended through Sept. 30, 2013, there is no need for producers to re-enroll in MILC.


Retroactive payments

As a result of legislative changes, MILC payments were triggered in September 2012 for fiscal year 2012 and October 2012 for fiscal year 2013. State and county FSA offices are collecting production records to determine MILC payments.

The September 2012 payment is 59.44¢/cwt. Producers who had not exceeded the maximum eligible quantity of 2.985 million lbs. of milk in fiscal year 2012 will be eligible for that payment. Producers who had exceeded the 2.985 million lb. cap will not be eligible.

The October MILC payment rate is 2.37¢/cwt. According to the FSA notice, computer software must be enhanced before those payments can be processed.


‘Start month’ question

The remaining question regards “start month” designation by producers exceeding the 2.985 million lb. threshold, and the notice to state and county FSA offices addressed that – in part.

Since MILC contracts were automatically extended, the production “start month” previously selected by larger producers in 2012 is applicable for fiscal year 2013. 

However, with the low October 2012 payment – the first month of fiscal 2013 – of just over 2¢/cwt., most larger producers would not have chosen to keep October as their “start month,” especially with MILC payments forecast to be higher in 2013.

Because producers were not able to make timely “start month” selections for fiscal year 2013 according to normal selection provisions, FSA will authorize a “relief period,” allowing MILC participants to change their “start month” selections. During the authorized relief period (to be announced), the production “start month” selected may be any month in fiscal year 2013.

DairyBusiness will post latest MILC payment projections as they become available.

Contact your local USDA/Farm Service Agency office for further information.