113-79 ), which was signed into law on February 7, 2014, makes significant changes to the structure of U.S. dairy support programs including the elimination of several major price and income support program provisions from the 2008 farm bill (the Food, Conservation, and Energy Act of 2008, P.L. 110-246 ), the extension of several smaller dairy programs, and the addition of two new programs. Programs Repealed

The three major price and income support programs from the 2008 farm bill are eliminated. Programs Extended

Certain other programs that were reauthorized by the expired 2008 farm bill ( P.L. Dairy Import Tariff Rate Quotas (TRQs) are a system of product-specific import quotas—with low in-quota tariffs and high, often-prohibitive above-quota tariffs—designed to protect higher-priced domestic dairy products by limiting the importation of lower-priced foreign dairy products. The Dairy Price Support Program is authorized under "permanent farm law" contained in the 1949 Agricultural Act, but is suspended by periodic passage of new farm legislation. Gross margin is the market value of milk minus feed costs. New Programs

The 2014 farm bill replaced the repealed price support programs—DPPSP, MILC, and DEIP—with two new support programs that are authorized for the five-year period of the 2014 farm bill, FY2014-FY2018—the Margin Protection Program (MPP) and the Dairy Product Donation Program (DPDP). and PH coverage in a range from 25% to 90%. Producers who sign up for MPP are ineligible to sign up for the Livestock Gross Margin for Dairy Cattle program (LGM-D) offered by USDA's Risk Management Agency (RMA). MPP Payments

Whenever the calculated Actual Dairy Production Margin (ADPM) falls below the selected MPP margin threshold for a consecutive two-month period, a payment will be made on the selected coverage-level portion of a participating producer's PH—referred to as the covered production history or CPH. represents 93% of the national average ADPM. MPP Premiums

Participating producers must pay premiums that start at the $4.50/cwt. margin protection level and rise with higher coverage levels up to the $8.00/cwt. No premium is charged for the minimum $4.00/cwt. In addition, a special 25% discount is available for premiums on the first 4 million pounds of CPH during each of calendar 2014 and 2015. Annual premiums are calculated as the product of the premium rate per cwt. Thus, the premium rate varies with the volume of covered production history (CPH) of the participating dairy operation (i.e., whether it has greater or less than 4 million lbs. of CPH), and the level of margin protection selected (from $4.00/cwt. to $8.00/cwt. in $0.50/cwt. increments). would be charged the lower premium rate on the first 4 million lbs. The Dairy Product Donation Program (DPDP)

According to the 2014 farm bill, USDA shall establish and administer a Dairy Product Donation Program (DPDP) to (1) address low dairy operating margins, and (2) provide nutrition assistance to individuals in low-income groups. After three consecutive months of purchases, the DPDP purchases are required to cease, even if the margin remains < $4.00/cwt. , if the U.S. price for dairy products is significantly above world market prices. First and foremost, by repealing the Dairy Product Price Support Program (DPPSP) and the Dairy Export Incentive Program (DEIP), U.S. dairy programs have made a significant step in better complying with its domestic support commitments under the World Trade Organization (WTO). The two proposed margin programs were similar in many respects; however, the Senate bill (but not the House bill) also included an accompanying market stabilization program—the Dairy Market Stabilization Program (DMSP), which, under certain conditions, would reduce payments to participating producers for their milk marketings when the margin falls below proposed statutory thresholds.
The 2014 farm bill (P.L. 113-79), which was signed into law on February 7, 2014, makes significant changes to the structure of U.S. dairy support programs, including the elimination of several major price and income support programs from the 2008 farm bill (P.L. 110-246), the extension of several smaller dairy programs, and the addition of two new programs.
Three of the principal dairy support programs under the 2008 farm bill—the Dairy Product Price Support Program (DPPSP), the Milk Income Loss Contract (MILC) program, and the Dairy Export Incentives Program (DEIP)—are eliminated. These programs are replaced by two new support programs that are authorized for the five-year period of the 2014 farm bill, FY2014-FY2018—the Margin Protection Program (MPP) and the Dairy Product Donation Program (DPDP).
The MPP is a voluntary program that makes a payment to participating farmers when a formula-based national margin—referred to as the Actual Dairy Production Margin (ADPM) and calculated as the national average farm price for all milk minus a national-average feed cost ration—falls below a producer-selected insured margin that can range from $4.00 per hundredweight (cwt.) to $8.00/cwt. in $0.50/cwt. increments. According to USDA final rules (released August 29, 2014), MPP payments are based on a farm-level production history and a producer-selected coverage level that ranges from 25% to 90%—the product of these two items yields the covered production history (CPH). Producers must pay an annual administrative fee of $100 for each participating dairy operation, and a premium that rises steadily for higher margin protection levels starting at the $4.50/cwt. margin level. The minimum $4.00/cwt. margin is fully subsidized and has no farmer-paid premium. The premium structure is further divided based on the volume of CPH—lower premiums are charged for the first 4 million pounds (lbs.) of CPH, higher premiums are charged on CPH above 4 million lbs. As an incentive to encourage participation by smaller dairy operations (with CPH under 4 million lbs.), premiums will be reduced by 25% across the board for all margin protection levels except the $8.00/cwt. level during calendar 2014 and 2015.
The DPDP requires USDA to procure and distribute certain dairy products when the ADPM falls below $4.00/cwt. for two consecutive months. DPDP dairy product distribution is required to target individuals from low-income groups and not be allowed for resale into commercial markets. Purchases and distribution under the DPDP end after three months or if the U.S. price for certain dairy products is significantly above world prices.
Several programs from the 2008 farm bill were extended through FY2018 including the Dairy Forward Pricing Program, the Dairy Indemnity Program, and certain provisions to augment the development of export markets under the National Dairy Promotion and Research Program (i.e., the dairy check off program). In addition, the final bill adopted a provision that requires USDA to adhere to standard rulemaking procedures.
Separately, federal milk marketing orders have permanent statutory authority and continue intact, as does the Livestock Gross Margin for Dairy Cattle program (LGM-D) and the suite of Dairy Import Tariff Rate Quotas (TRQs) that limit access to the U.S. domestic market by lower-priced foreign dairy products. The permanent Dairy Price Support Program contained in the Agricultural Act of 1949 (P.L. 81-439) is suspended but would be reactivated should MPP expire at the end of FY2018 without replacement or extension.