USDA launches new dairy decision tool

A new online tool designed to assist dairy producers in understanding coverage options under the new farm bill was developed in part by a dairy economist with Ohio State University'sCollege of Food, Agricultural, and Environmental Sciences.

The U.S. Department of Agriculture'sFarm Service Agency recently announced the launch of the Margin Protection Program for dairy producers, which is a voluntary dairy safety net program that replaces the farm bill's previous milk price and revenue support programs.

Cameron Thraen, an associate professor in the CFAES Department of Agricultural, Environmental and Development Economics and a member of the National Program on Dairy Markets and Policy, recently worked with a team of researchers from the University of Illinois, the University of Wisconsin, the University of Minnesota, Michigan State University, Cornell University and The Pennsylvania State University to develop the web-based decision support tool for MPP.

Thraen also holds appointments with Ohio State University Extension and the Ohio Agricultural Research and Development Center, the statewide outreach and research arms, respectively, of the college.

The MPP online tool can be accessed on the following websites: www.fsa.usda.gov/mpptool, www.dairymarkets.org/MPP, and www.farmdoc.illinois.edu/farmbilltoolbox.

The four-step tool is easy to use, Thraen said. The tool helps producers calculate total premium costs and administrative fees associated with the program, as well as forecast MPP payments that will be made during the coverage year and the total MPP benefit that the producer can anticipate, he said.

To accompany the tool, the researchers have also developed a series of online educational resources and they will host a number of workshops around the country to train producers and educators on how to use the decision tool.

In using the MPP online tool, producers can also access a tool to make decisions regarding the Livestock Gross Margin-Dairy insurance program, also in the farm bill, Thraen said.

"The new Margin Protection Program should be viewed as new opportunity to effectively and affordably manage farm income volatility and market risk, and to avoid the catastrophic financial outcomes that played out in 2009 and again in 2012," he said. "In creating MPP, the 113th Congress understood that the key to success for this program will be in providing all of the nation's dairy farmers open access to up-to-the minute margin forecasts and timely market information on the future direction of milk and feed prices to help with making sound MPP and LGM-Dairy decisions.

"This is precisely what our research program here at Ohio State has created and the product of that research forms the basis for linking feed and milk prices with state-of-the-art forecasting techniques."

MPP took effect on Sept. 1 and program enrollment began Sept. 2. With the passage of the most recent farm bill, the U.S. federal dairy farm safety net underwent the most comprehensive reform that the program has seen in decades, Thraen said.

Due to these reforms, the USDA awarded $6 million in funding to universities and cooperative state extension services to prepare farmers for new farm bill programs, such as MPP. The MPP online tool development was based on research focused on the integration of risk management and federal dairy policy by Thraen and former AEDE doctoral student John Newton, now a faculty member at the University of Illinois at Urbana-Champaign. This research project received partial financial support from the USDA Agricultural Marketing Service.

Thraen studies agricultural policy and risk analysis for the dairy industry, as well as dairy futures and options contract trading on the Chicago Mercantile Exchange. He is co-director of the National Program for Integrated Dairy Risk Management Education and Research, a national program to develop educational materials and software for the dairy industry.