In summer of 2002, dairy producers were asked to enroll at FSA offices for the Milk Income Loss Contract (MILC) program. As part of their enrollment they were asked to declare the month during the October 2002 to September 2003 fiscal year they wished to begin their annual payments that contributed toward the 2.4 million pounds of milk to include in the program. Last year, declaring October as the beginning month was an easy decision, because as milk prices hovered near government support price levels, producers were ensure that MILC payments would be near maximum levels.
This year it is likely, based on Chicago Mercantile Exchange futures prices, that milk prices will be considerably higher in October. Hence, MILC payments will be considerably lower. Infact, the MILC payment level for September is $0.00, since the Boston Class I price exceeds $16.94. Dairy producers who sell more than 2.4 million pounds of milk per year may wish to ask FSA to delay their start month. The clock will start against the 2.4 million pound production limit only in the first month that payments are actually made, but payments in that month may be very low.
Dairy producers selling less than 2.4 million pounds need not change from October. However dairy producers marketing more than 2.4 million pounds need to consider the implications of changing or not changing. A decision to delay from an October 1, 2003 start date must be made by September 15, 2003 for the next fiscal year.
To help producers make this decision, the University of Wisconsin's website "Understanding Dairy Markets" has a spreadsheet using up-to-date projected milk prices based on recent Chicago Mercantile Exchange closings. Once on that site, click on MILC Program Description and Payment Calculator (in the menu on the left side of the screen) and then on Spreadsheet Model for Undertaking Farm-Level Analysis of MILC Program: Multiple Herd Size Evaluations.