Margin Protection Program for Dairy

Farm Service Agency

MPP-DAIRY

Overview

The Margin Protection Program for Dairy 

(MPP-Dairy) is a voluntary risk management program 

for dairy producers authorized by the 2014 Farm Bill 

through Dec. 31, 2018. Significant changes to 

MPP-Dairy for the 2018 coverage year are further 

authorized by the Bipartisan Budget Act of 2018. The 

MPP-Dairy offers protection to dairy producers when 

the difference between the all milk price and the 

average feed cost (the margin) falls below a certain 

dollar amount selected by the producer.

A web tool is available that will allow dairy producers 

to use data unique to their specific operation, 

combined with other variables, to test a variety of 

financial scenarios before eventually enrolling in the 

new MPP-Dairy. The web tool is located at 

www.fsa.usda.gov/mpptool.

FACT SHEET

April 2018

1

Eligible Dairy Operations

To be eligible for MPP-Dairy, a dairy operation must:

• Produce and commercially market milk from cows

 located in the United States;

• Provide proof of milk production at the time of

 registration; and

• Not be enrolled in the Risk Management Agency’s

 Livestock Gross Margin for Dairy Program

 (LGM-Dairy).

Dairy operations may consist of one or more dairy 

producers who are in the business of commercially 

producing and marketing milk as a single unit.

Dairy producers who are members of the dairy 

operation must share in the risk of producing milk and 

make contributions to the dairy operation that are at 

least commensurate with their share of the proceeds of 

the operation.

Dairy operations must be in compliance with highly 

erodible land and wetland conservation provisions. For 

more information, visit www.fsa.usda.gov/compliance. 

Adjusted gross income provisions do not apply to 

MPP-Dairy.

Producers may have more than one dairy operation, 

but they must be separate and distinct in order to have 

a separate contract.

Dairy operations, as constituted for the Milk Income 

Loss Contract (MILC) Program, are eligible for 

MPP-Dairy.
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MARGIN PROTECTION PROGRAM FOR DAIRY - APRIL 2018

Registration

Eligible dairy operations must register for coverage at 

the Farm Service Agency (FSA) office where their 

farm records are maintained by:

• Establishing a production history by completing

 and submitting form CCC-781, “Margin Protection

 Program for Dairy Producers (MPP-Dairy)

 Production History Establishment”;

• Completing and submitting form CCC-782,

 “Margin Protection Program for Dairy Producers

 (MPP-Dairy) Contract and Annual Coverage

 Election”;

• Paying the $100 administrative fee; and

• Paying the premium, if any.

An administrative fee of $100 is required to be paid for 

each covered year through the duration of the program, 

except that this will not apply for dairy operations that 

opt out for the 2018 coverage year nor apply to 

producers that qualify for exemption as a limited 

resource, beginning, veteran, or socially disadvantaged 

(SDBLRV) farmer.

2018 Registration and

Re-Enrollment Period

The registration and re-enrollment period for coverage 

year 2018 will begin April 9, 2018, and continues 

through June 1, 2018. The re-enrollment period allows 

dairy producers, including those that previously signed 

up and those that did not, an opportunity to make new 

elections for 2018. Coverage begins January 1, 2018. 

If a dairy operation previously elected coverage for 

2018, a new coverage election for 2018 must be made 

during the re-enrollment period. If a new election for 

2018 is not made, the dairy operation will not have 

coverage for 2018.

To qualify for the administrative fee exemption as a 

limited resource, beginning, or socially disadvantaged 

farmer or rancher, form CCC-860 must be completed 

and submitted at the time of 2018 registration for 

coverage to the dairy operation’s local County FSA 

Office, if not already on file. Veteran status candidates 

only, seeking the administrative fee exemption must 

provide a copy of form DD-214 to the County Office 

at the time of registration for 2018 coverage. A refund 

of an administrative fee previously paid for 2018 

coverage may be requested from the County Office if 

the producer now qualifies for the SDBLRV 

exemption.

A new dairy operation that has been established after a 

registration period closes is required to submit a 

contract within the first 90 calendar days in which the 

dairy operation first commercially markets milk for the 

calendar year or wait until the next registration period 

for the next calendar year of coverage. Coverage for 

dairy operations registering within the first 90 days of 

marketing milk will become effective beginning the 

next full month after registration.

During the 2018 re-enrollment period, dairy producers 

with 2018 target marketings under LGM-Dairy that 

want to participate in MPP-Dairy must sign up during 

the MPP-Dairy 2018 re-enrollment period, no later 

than June 1, 2018. However, MPP-Dairy coverage 

will not begin until the month after the producers 

target marketings under LGM-Dairy have concluded to 

ensure the contractual requirements of the LGM-Dairy 

insurance contract have been met. 
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MARGIN PROTECTION PROGRAM FOR DAIRY - APRIL 2018

Production History Establishment

Participating dairy operations establish their 

production history upon initial registration and all 

producers in the participating dairy operation must 

provide adequate proof of the dairy operation’s 

quantity of milk marketed commercially. All 

information provided is subject to verification and 

spot-checked by FSA.

For existing dairy operations, the production history is 

established using the highest annual milk production 

marketed during the full calendar years of 2011, 2012 

or 2013.

Dairy operations without 12 full months of milk 

marketings as of Feb. 7, 2014, may be considered new 

dairy operations.

New dairy operations may establish their production 

history using one of the following methods:

• Available full month’s marketed milk production

 for the calendar year the operation first began to

 market milk, calculated to a yearly amount using a

 national index based on seasons; or

• Estimated actual marketed milk production based

 on the actual herd size of the dairy operation

 relative to the national rolling herd average.

In subsequent years, the production history of a 

participating dairy operation will be adjusted to reflect 

any increase in the national average milk marketing 

production; no change in production history is 

otherwise allowed, except for an intergenerational 

transfer. Additionally, there will be no change in 

production history through the expansion or reduction 

in herd size of the participating dairy operation.

Intergenerational Transfers

A dairy operation may add to their Commodity Credit 

Corporation (CCC)-approved production history once 

during the term of the contract (through Dec. 31, 2018) 

to accommodate intergenerational transfers, where a 

son, daughter, grandchild or spouse of a child or 

grandchild joins the participating dairy operation. The 

quantity of increased production history will be 

determined based on the number of cows purchased by 

the new family member multiplied by the national 

rolling herd average data for the current year in effect 

at the time of the intergenerational transfer. The 

increased production quantity will be limited to four 

million pounds and will receive coverage at the same 

elected coverage threshold and coverage percentage in 

effect for the participating dairy operation at the time 

the production history takes effect. To be eligible, the 

new family member joining the dairy operation must 

certify to equity and labor contributions.

Note: An intergenerational transfer will not be allowed if

 the participating dairy operation’s current annual

 production and the increase in herd size by the new

 member(s) are less than the operation’s established

 production history.

The dairy operation will have the option to make their 

intergenerational transfer effective with the next month 

following FSA notification on form CCC-781 

Continuation Sheet or the next coverage year (Jan. 1, 

2018). If the dairy operation elects to make coverage 

on the additional quantity effective in the same 

coverage year, any additional premium for the 

production will be due at the same time as the 

premium on the existing production, except if the 

notification is made after Sept. 1, payment for the 

additional premium will be due immediately.

Notification of an intergenerational transfer must be 

made to FSA within 60 calendar days of the cow 

purchase(s).
MARGIN PROTECTION PROGRAM FOR DAIRY - APRIL 2018

4

Coverage Election

Catastrophic (CAT) coverage of $4 margin coverage 

level at 90 percent of the established production 

history requires no premium payment, but the dairy 

operation must pay the $100 administrative fee, unless 

exempt for SDLRBV.

For increased protection, dairy operations may 

annually select a percentage of coverage from 25 to 90 

percent of the established production history in 5 

percent increments and a coverage level threshold 

from $4.50 to $8 in 50 cent increments.

Coverage election must be made prior to the end of the 

annual election period. After the initial year of 

registration, failure to make an election results in the 

coverage level defaulting to the CAT level of 90 

percent at $4 margin. Dairy operations may only select 

one coverage level percentage and coverage level 

threshold for the applicable calendar year. All 

producers in the participating dairy operation with a 

share and risk in the milk marketing must agree to the 

coverage elected on the contract.

For the 2018 coverage year only, MPP-Dairy 

participants may opt out of the program by not making 

a coverage election during the applicable annual 

coverage election for the 2018 coverage year.

Premiums

A participating dairy operation will pay a premium 

based on the level of coverage elected. Premiums will 

be calculated by multiplying the coverage percentage 

selected (from 25 percent to 90 percent) multiplied by 

the production history of the dairy operation to obtain 

the covered milk marketings. The covered milk 

marketings in hundredweight (cwt.) are multiplied by 

the premium per cwt. applicable to the coverage level 

selected. Premiums will be calculated from Tier 1 for 

covered production history up to five million pounds 

and from Tier 2 for covered production history 

exceeding five million pounds.

For calendar year 2018, 100 percent of the calculated 

premium is due by Sept. 1 of the calendar year of 

coverage for dairy operations that elect coverage 

above the $4 level.

An operation must pay either:

 (1) The premium in full at the time of annual

 coverage election; or

 (2) 100 percent of the premium by Sept. 1 of the

 applicable calendar year of coverage.

Example: The premium is due Sept. 1, 2018, for the 

2018 coverage year.

Premium payments may be submitted to the 

administrative FSA county office at any time prior to 

Sept. 1 or the deadline determined by FSA.

If the dairy operation selected buy-up coverage during 

the previous 2018 enrollment period, new 2018 

coverage elections made during 2018 re-enrollment 

will change the previously calculated amount of the 

premium. If the dairy operation has already paid the 

2018 premium, a refund may be requested or that 

amount may be applied to the dairy operation’s newly 

calculated premium for 2018. 

Premium balances due by Sept. 1 will not be deducted 

from any MPP-Dairy payments made to the 

participating dairy operation during the applicable 

calendar year of coverage.

Coverage 

Level (Margin) 

per cwt.

$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

$7.00

$7.50

$8.00

Tier 1 Premium

for 2018

Covered production 

history less than

five million lbs.

None

None

None

$0.009

$0.016

$0.040

$0.063

$0.087

$0.142

Tier 2 Premium

for 2018

Covered production 

history greater than 

five million lbs.

None

$0.020

$0.040

$0.100

$0.155

$0.290

$0.830

$1.060

$1.360
MARGIN PROTECTION PROGRAM FOR DAIRY - APRIL 2018

5

New dairy operations formed after the annual 

registration period will have their premiums prorated 

for that year based on the portion of the calendar year 

for which they purchase coverage.

Dairy operations may have their milk marketing 

company remit the premium payment to their 

administrative FSA county office on their behalf if an 

agreement is worked out with their milk marketing 

company.

Margin Calculations

The “production margin” is the difference between the 

national all milk price and the national average feed 

cost.

The all milk price is the average price of milk 

marketed in the United States as reported by the 

National Agricultural Statistics Service (NASS).

The average feed cost is calculated by using the sum 

of:

• 1.0728 times the price of corn per bushel, plus

• .00735 times the price of soybean meal per ton,

 plus

• .0137 times the price of alfalfa hay per ton.

The corn and alfalfa hay prices are those reported in 

the monthly NASS Agricultural Prices Report. The 

price of soybean meal is the Central Illinois soybean 

meal price delivered by rail as reported in the 

Agricultural Marketing Service (AMS) Market 

News-Monthly.

The production margin will be calculated monthly.

Payments

A participating dairy operation will receive a margin 

protection payment whenever the average actual dairy 

production margin for a month is less than the 

coverage level threshold selected by the participating 

dairy operation, except if the dairy operation opts out 

of 2018 coverage.

The margin protection payment calculation is the:

• Coverage level threshold selected by the

 participating dairy operation, minus

• Actual dairy production margin for the month,

 multiplied by

• Coverage percentage selected by the participating

 dairy operation, multiplied by

• Established production history in cwt. of the

 participating dairy operation, divided by 12.

Example: A dairy operation has an established 

production history of three million pounds (30,000 

cwt.). The participating dairy operation selected the 50 

percent coverage level at the $7 threshold. The actual 

production margin is $5 for that month. The actual 

production margin is less than the threshold selected. 

Therefore, a payment will be earned as calculated 

below:

$7 threshold minus $5 margin = $2 difference

$2 times 50 percent times 2,500 cwt. (30,000 cwt. / 12) 

= $2,500.

Payments under MPP-Dairy may be reduced by a 

certain percentage due to a sequester order required by 

Congress and issued pursuant to the Balanced Budget 

and Emergency Deficit Control Act of 1985. Should a 

payment reduction be necessary, FSA will reduce the 

payment by the required amount.
MARGIN PROTECTION PROGRAM FOR DAIRY - APRIL 2018

USDA is an equal opportunity provider, employer and lender. 6

Contract Modifications

Dairy operations must immediately notify FSA of any 

modifications that may affect their participation in 

MPP-Dairy. Contract modifications include, but are 

not limited to, the death of a producer on the contract; 

producer joining the operation; member exiting the 

operation; relocation of the dairy operation; transfer of 

shares by sale or other transfer action; or dairy 

operation reconstitutions resulting in a change in the 

organizational structure of the participating dairy. 

Changes are subject to review by FSA to determine if 

the changes were made solely to circumvent the 

purpose of the program.

In general, if premiums are paid in full, modifications 

will take effect the next month . Otherwise, 

modifications will not be recognized until the 

following open election period when all associated 

premiums from any previous calendar year of 

coverage have been paid in full.

How to Apply

To apply for MPP-Dairy, dairy operations must submit 

form CCC-781, “Margin Protection Program for Dairy 

Producers (MPP-Dairy) Production History 

Establishment,” and form CCC 782, “Margin 

Protection Program for Dairy Producers (MPP-Dairy) 

Contract and Annual Coverage Election,” to their local 

FSA county office. These forms are available at FSA 

county offices and online at 

http://forms.sc.egov.usda.gov/eForms/

welcomeAction.do?Home.

For More Information

This fact sheet is provided for informational purposes 

only; other restrictions or eligibility requirements may 

apply. For details, visit www.fsa.usda.gov/dairy and 

consult with your local FSA county office. The 

MPP-Dairy web tool is available online at 

www.fsa.usda.gov/mpptool. To find your local FSA 

county office, visit http://offices.usda.gov.