MILC Program Authorized in the 2008 Farm Bill
The Milk Income Loss Contract (MILC) was reauthorized in the 2008 Farm Bill. It was modified from its previous incarnation in three ways: 1) it includes an adjustor to the trigger price based on the cost of feed, 2) it raises the percentage of payment from 34% to 45%, and 3) it increased the annual production cap from 2.4 million pounds of milk to 2.985 million pounds. More complete information on the MILC program can be found on the USDA-FSA web page.
Increasing the cap on eligible milk will help some farms claim a greater MILC payment. However, larger farms will still try to maximize the market loss assistance payment by choosing the month that they wish payments to begin. Previous MILC programs have required farms to to select the production start month on or before the 14th of the month that the farm wants to begin payments. The estimated MILC program payments on this web site will give 12 advance months for producers to gauge their start month.
The estimates are made using the futures market values for Class III and Class IV milk, and corn and soybeans. The Class I estimate is a statistical estimate based on the the higher of the Class III or IV Chicago Mercantile Exchange futures prices for any given day plus $3.25--the Class I differential in Boston, MA. The Trigger price is never less than $16.94 but can be higher when adjusted for feed costs. The feed cost adjuster for the trigger price kicks in when the NASS ration cost is greater than $7.35 per cwt. of feed.
Feed costs are based on estimates of NASS corn, soybeans and alfalfa hay. The corn and soybean values are estimated from the Chicago Board of Trade values for corn and soybeans for any given day plus a NASS basis adjustment for corn and soybeans as outlined in a paper by Linwood Hoffman at USDA-ERS. The NASS alfalfa hay estimate is based on a regression with lagged corn and soybean values and explains about 95% of the variability in NASS hay prices. The ration is composed of 51 pounds of corn, 8 pounds of soybeans and 41 pounds of alfalfa hay.
Please note: These are estimates and they are based on futures market values for commodities. The opinions for these values will change daily based on information received by traders. The MILC estimates are calculated based on these changing opinions and may not reflect the actual outcome for the coming year. Please use them accordingly when making your own production start month determination.