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Analysis of the MPP Program: Available Software and Website Resources Prof. Brian W. Gould Department of Agricultural and Applied Economics University of Wisconsin-Madison University of Wisconsin Extension August 27, 2014 Farm Services Agency USDA Rothschild, WI. - PowerPoint PPT Presentation

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Analysis of the MPP Program: Available Software and Website Resources

Prof. Brian W. GouldDepartment of Agricultural and Applied EconomicsUniversity of Wisconsin-MadisonUniversity of Wisconsin Extension

August 27, 2014Farm Services AgencyUSDARothschild, WI

Dairy Marketing and Policy (DMaP) GroupInter-university group of dairy economistsUniversity of Wisconsin: M. Stephenson & B. GouldCornell University: A. NovakovicMichigan State University: C. WolfeUniversity of Minnesota: M. BozicUniversity of Illinois: J. NewtonOhio State University: C. ThraenPenn. State University: C. NicholsonRecently awarded a multi-year Coop Agreement with FSA to provide MPP educational programming

2Our MPP extension education efforts supported by the following:

The following USDA grant is acknowledged:USDA-NIFA Award Number 2012-49200-20032

MPP ResourcesThe purpose of this presentation is toFamiliarize you with resources developed by the DMaP groupAlert you to resources available should questions concerning LGM-Dairy brought up by your clientsProvide contact informationTo provide more detailTo refer your clients should complicated questions be raisedThis presentation can be obtained from the following URL within the DMaP website:

4Agricultural Act of 2014Besides creating the MPP program:Creates a dairy product donation program in effect when Income Over Feed Cost (IOFC) below $4/cwtSecretary has considerable latitude in determining purchased dairy product amountsUnlike support program purchases cannot enter commercial market but must be donatedRepeals MILC program after MPP operationalRepeals: Dairy product price support program 5Besides creating the MPP program:Repeals: Dairy export incentive program (i.e., the DEIP program)Renews: Dairy forward pricing program for Class II Class IV milk purchased by private dairy product manufacturersCooperatives have always had this abilityAllows: Establishment of a Potential CA Federal OrderSome language as to how to transition but little detail

6Agricultural Act of 2014MPP ResourcesAnticipated alternative information and educational resources available from:FSA-basedFarm organizationsCooperatives/private processorsUniversity faculty/extension staffDMaP dairy economists group:http://dairymarkets.org/MPPFarm credit systemManagement firmsIf you become aware of websites/other resources send a note to DMaP team member

7DMaP MPP ResourcesWe have a dedicated MPP website:http://www.dairymarkets.org/MPPAvailable on that website are links to two software systems designed explicitly to help your clients better understand the MPP programMPP DashboardMPP Purchase Decision Tool

8The MPP DashboardSoftware system used to undertake what-if type of analysisWhat would have been the outcome if MPP had been available starting in 2000?We ignore the impact that MPP existence would have had on historical milk production amountsTwo identical versions available:Web-based:farmdocdaily.illinois.edu/tools/flash_dairy_dashboard_010514.htmlPDF based:

9The MPP Dashboard10

Year(2000-2015)Min. IOFC($4.00-$8.00)% of Prod. Insured(25%-90%)APH(Max[2011-2013])The MPP Dashboard11www.farmdocdaily.illinois.edu/tools/flash_dairy_dashboard_010514.html

The MPP DashboardLets go through a simple example3.5 million lbs APH80% coverage$4.00 - $8.00 coverage2008 & 2009

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The MPP Dashboard13

www.farmdocdaily.illinois.edu/tools/flash_dairy_dashboard_010514.htmlAvg. IOFC = $8.57The MPP Dashboard14

www.farmdocdaily.illinois.edu/tools/flash_dairy_dashboard_010514.htmlAvg. IOFC = $4.58The MPP Dashboard15www.farmdocdaily.illinois.edu/tools/flash_dairy_dashboard_010514.html

Avg. IOFC = $4.58The MPP Participation DecisionTwo types of individuals:Those who have signed up going into a particular year and need to think about contract designThose who have not signed up and have toDecide whether or not to sign-upIf signing up, design the contractEither type of individual needs an estimate of IOFC over the next yearLets first talk about those who have already signed up16Contract Decision: Already Signed UpFor those currently enrolled there will be annual decisions as to:Minimum IOFC protectedPercent of current APH that will be insuredNeed to look forward for the 12 months encompassed by the next MPP contractDMaP team has developed a tool to forecast likely IOFC scenarios Based on current (i.e., date of analysis) futures market conditionsDairy Margin Protection Decision Tool

17Default view of MPP Decision Tool18

Do you want to analyze MPPor LGM-Dairy program?Coverage Year: Default is forward lookingEnter your APH (lbs)English or Spanish?Contract Decision: Already Signed Up19

Forecast coverage year bi-monthly IOFCsDo you want to display the forecast Probability Table or Forecast Graph?Probability table viewProbability that Jul-Aug 2015 IOFC will be less than $7.00Contract Decision: Already Signed Up20

IOFCs with 25% probability of being below forecast IOFCIOFCs with 25% probability of being above forecast IOFCPredicted/Forecast IOFCForecast graph viewContract Decision: Already Signed UpOnce you have looked at likely IOFC margins via the Forecast Margin part of the program, what are expected:Premium costs for a particular policy?Net returns for that policy (= Payments Costs)To answer the above, click on the Selected Coverage portion of the program 21

Contract Decision: Already Signed Up22

For 2013 design decision the 2012 data is historyIOFC TargetContract Costs = Premium + $100 Estimated PaymentsEstimated Payments Contract CostsMove this icon to set Coverage %Contract Decision: Already Signed Up

232013 design parameters: % Coverage/IOFC TargetIOFC TargetContract Costs = Premium + $100 Forecast PaymentsForecast Payments Contract CostsActual Payments Contract CostsMove this icon to set Coverage %Contract Decision: Already Signed UpIf a producer is not a currently enrolled in MPP:May want to compare LGM-Dairy with MPP given restriction of not being able to enroll in bothOne can enroll for any year up to and including 2018 Once enrolled, operation is enrolled until end of 201824Contract Decision: Considering Sign-UpThe MPP decision tool allows immediate access to LGM-Dairy Analyzer software program:

When you click on the above you are directed to the following web page:

25Contract Decision: Considering Sign-Up

26Contract Decision: Considering Sign-Up

Software for comparing LGM-Dairy and MPP27

For more assistance with LGM-Dairy you may want to have your clientsAccess the full LGM-Dairy website: http://future.aae.wisc.edu/lgm_dairy.htmlContact Prof. Gould using information to followContact Information

Professor Brian W. Gouldbwgould@wisc.edu(608)263-3212MPP Information: Dairy Marketing and Policy (DMaP) dairy economist group website: www.dairymarkets.org/mppwww.farmdocdaily.llinois.edu

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