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Financial Balancing Act Means Managing Risk is Essential

Joan Sinclair Petzen, Farm Business Management
Northwest New York Dairy, Livestock & Field Crops

September 19, 2018

USDA - Market Facilitation Program (MFP)

There has been a lot of buzz in the agricultural press about the USDA-MFP.  The program provides direct payments to help corn, soybean, wheat, dairy, hog and other producers who have been directly impacted by illegal retaliatory tariffs, resulting in the loss of traditional exports. Sign-up for the program is open now through January 15, 2019 at your local Farm Service Agency (FSA) office.

 The initial MFP rates for local crops are as follows:

• Corn $0.01 per bushel

• Dairy $0.12 per cwt.

• Hogs $8.00 per head (number of head as of August 1, 2018)

• Soybeans $1.65 per bushel

• Wheat $0.14 per bushel

An initial payment will be made shortly following signup on fifty percent of the producers' production history.  For details on the production history for each commodity refer to the MFP Fact Sheet:  https://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/State-Offices/Nebraska/pdfs/MFP%20Fact%20Sheet.pdf.  On or about December 3, 2018, CCC will announce a second payment rate, if applicable, that will apply to the remaining 50 percent of the producer's production.

Cornell University's Dr. Andrew Novakovic summarized the process used to determine the payment levels outlined in a USDA press release:  https://www.usda.gov/media/press-releases/2018/09/13/usda-details-trade-damage-estimate-calculations  as follow, "Secretary Perdue asked his Chief Economist to advise him on how to divvy up the pot.  Dr. Johansson and his team decided to use the approach that is used in World Trade Organization trade disputes.  The essence of this calculation is to take the difference between what exports might have been in the absence of whatever policy triggered the damage and what exports actually were or are projected to be.  This total dollar amount is the total damage.  If a compensating payment is made on all milk produced, then the total damage is divided by total production, to come up with a dollar per cwt. compensation payment."

Dairy Revenue Protection (DRP)

DRP, a new revenue protection tool for dairies, was announced in August 2018.  Dairy producers will be able to purchase protection against quarterly declines in dairy revenue.  The product pricing is flexible to allow producers to choose whether their coverage and indemnities will be based upon Class III and Class IV prices or butterfat and protein percentages.  The latter will use the prices of butterfat, protein and other solids to establish the insured milk price.

Coverage level choices will add more flexibility.  Producers may choose to insure coverage levels from 70 to 95 percent of their quarterly production.  Premium subsidies decline as the coverage level increases according to the following table.

DRP Coverage and Premium Subsidy Percentages

An application for DRP must be made with an authorized crop insurance agent at any time.  Coverage begins when you purchase a quarterly coverage endorsement.  Multiple quarterly endorsements can be purchased with one policy.  Producers can purchase multiple quarterly endorsements for the same quarterly period to customize their coverage further but coverage cannot exceed their total production for the quarter.  Coverage purchases are time sensitive.  The sales period begins each day when the coverage prices and rates are validated and published on RMA's website by 4:00 PM Central time and ends at 9:00 AM Central time of the following business day.

During the policy year, Livestock Gross Margin - Dairy Insurance and Dairy Revenue Protection can be purchased.  However, the policy with the earliest purchase date for any given quarter will be in effect to cover production for that quarter.  Producers can participate in the USDA Margin Protection Program in addition to purchasing Dairy Revenue Protection.

Policy details can be found at:  https://www.rma.usda.gov/livestock/.

Rainfall Index - Pasture, Rangeland and Forage (RI-PRF)

Since the hay crop is critical to the success of livestock operations, whether it is harvested mechanically or through grazing, a drought can significantly impact any ruminant livestock business. In recent years, we are seeing wider swings in precipitation and frequently yield of forage crops is impacted for part of the season.  The (RI-PRF) crop insurance is designed to provide a cash payment to allow producers to cover a shortfall in forage production during a drought. This policy must be purchase by November 15 of year preceding the crop production season.

RI-PRF is an area-based plan of insurance that uses a rainfall index to determine losses and trigger indemnities. It is important for ranchers and farmers to understand that payments are not based on individual rain gauges on their farm or a single weather station.  This policy is designed to insure against a decline in an index value that is based on the long-term, historical, average precipitation for the same area of land for the same period of time. It does not measure, capture, or use the actual crop production of any producer or any of the actual crop production within the area.

Indemnity payments are earned by policy holders when the Final Grid Index is less than the result of multiplying the Expected Grid Index by the coverage level selected by the producer, which is referred to as the Trigger Grid Index. RI-PRF only covers a decline in the precipitation index.  It does not cover other perils such as, but not limited to, flood, fire, and hail.   NOAA CPC data is used to calculate the Final Grid Index and the Expected Grid Index.

Because RI-PRF is an area insurance plan and does not measure, capture, or use any actual crop production, an eligible producer may experience a production loss and not receive an indemnity payment. However, it is also possible for an eligible producer to receive an indemnity payment without suffering a loss of actual production. The producer's amount of production is not considered and no on-the-ground inspection of crop conditions is conducted to determine eligibility for an indemnity payment.

Online tools are available to assist producers to determine how well the program correlated with their past forage production on the RMA https://prodwebnlb.rma.usda.gov/apps/prf.  It would be instructive to plug your farm location into the tool and get an idea of what the historical indemnities might have been. 

Remember the goal of crop insurance is to take the "bumps in the road" out of your cash flow from year-to-year.  Each of these programs and insurance policies offer producers a chance to choose a coverage option to protect against revenue loss from price changes or weather events.  If your business is not in a position to mitigate these risks on its own, then reach out to your advisors, or engage in a conversation with a crop insurance agent to learn how reduce your risk through program participation or insurance.

USDA RMA fact sheets and tools were used to source information for this article.  




Financial Balancing Act Means Managing Risk is Essential (pdf; 575KB)


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calendar of events

Upcoming Events

Wyoming County Farmland Protection Informational Seminars

March 12 - March 30, 2019
Two Dates/Times: Thursday, Mar 21st, 7-9 p.m. & Saturday, March 30th, 10 a.m. - 12 p.m.
Warsaw, NY

Wyoming County Agriculture and Farmland Protection Board (WCAFPB) will accept pre-applications from farmland owners for the next round of New York State purchase of development rights (PDR) grants through May 3, 2019 at 3:00 pm. All owners of farms interested in applying must attend an informational seminar. Landowners can attend on either Thursday, March 21, 7:00 pm to 9:00 pm or Saturday, March 30, 10:00 am to 12:00 pm.At the seminars, Genesee Valley Conservancy (GVC) Farmland Protection Specialist David Bojanowski will discuss PDR, Conservation Easements, New York State PDR Grant Program, an example PDR Project and landowner considerations when considering farmland protection. Cornell Cooperative Extension's (CCE) Joan Sinclair Petzen will share information about the Wyoming County Context for Farmland Protection and Wyoming County's Farmland Protection Pre-Application Process.  
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Internal Parasites in Sheep & Goats IPM/FAMACHA Workshop, Pre-Register by 3/28

March 30, 2019
9:45 a.m. - 4:00 p.m.
Naples, NY

Internal parasites are one of the biggest health problems affecting goats and sheep in the Northeast. Dewormer resistance is becoming commonplace. As a result, producers need to know how best to manage parasites. In this workshop, producers will learn the basics of parasite control as well as how to develop integrated parasite management programs for their farms. We will also provide hands-on training on how to use the FAMACHA Anemia Card (good only for the barber pole worm) as part of a 5-point check to determine which animals in your herd or flock most likely need deworming. This workshop will also include hands-on training on doing fecal egg counts. You are welcome to bring a refrigerated fecal sample of 8 to 10 fecal pellets from one sheep or goat at your farm to the workshop.
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2019 Worker Protection Standard Training & DEC Special Permit Training (Wayne County)

April 9, 2019
8:30 AM - 12:30 PM English Session / 1:00 PM - 5:00 PM Spanish Session
Newark, NY

Just like last year, Special Permits (SP) will only be issued for 11 specific pesticide labels and SP trainees will have to pass a test. This will relieve the certified pesticide applicator from "on-site within voice contact" supervision of non-certified pesticide applicators when they are handling federally-restricted-use pesticides for which they hold a Special Permit. The labels that will be covered include Lorsban Advanced, Endigo ZC, Warrior II with Zeon Technology, Agri-Mek SC, Beseige, Gramoxone SL 2.0, Leverage 360, Danitol 2.4EC, Mustang Maxx, Asana XL, and Lannate LV.

New York DEC notes that the Special Permit process is intended for farm workers with English language skills that are not adequate to pass the DEC private applicators exam. All others are encouraged to apply for their private applicator's license via taking the certification exam.

Certified Supervisors are required to attend the first 30 minutes of training. 

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Announcements

Producers Previously Enrolled in the LGM Program Now Eligible for MPP

Dairy Producers Previously Enrolled in the Livestock Gross Margin Program Now Eligible for 2018 Margin Protection Program
The U.S. Department of Agriculture (USDA) today announced that dairy producers who elected to participate in the Livestock Gross Margin for Dairy Cattle Program (LGM-Dairy) now have the opportunity to participate in the Margin Protection Program for Dairy (MPP-Dairy) for 2018 coverage. Sign-up will take place March 25 through May 10, 2019.
Eligible producers can enroll during the sign-up period at their local USDA service center. To locate your office, visit farmers.gov.


Smart Farming Team Technical Assistance Grant Application

The Labor Ready Farmer Project is offering grants to provide up to 12 hours of Technical Assistance (TA) consulting services to farms who want to make improvements to their farm's processes in hiring, training, managing or evaluating employees. Applicants will choose from one of the following four areas for TA assistance and identify a specific project. If selected they will be matched with a "Smart Farming Team" of consultants who will provide one on one technical assistance.
  • HIRING EMPLOYEES 101 - GETTING OFF TO A GOOD START
  • ONBOARDING & TRAINING EMPLOYEES QUICKLY AND EFFECTIVELY
  • FINE-TUNING & IMPROVING THE WORKING ENVIRONMENT
  • H2-A READINESS
Please complete this application and send to Nicole Waters, Beginning Farm Project Coordinator for the Cornell Small Farms Program. The form can be submitted by email, mail or in-person at the address listed below. Please feel free to call or email with any questions.

Nicole Waters - Beginning Farmer Project Coordinator
Plant Science Building, Room 15b
Tower Road, Cornell University
Ithaca, NY 14853
Phone: 607-255-9911
Email: nw42@cornell.edu

Applications accepted on a rolling basis.



USDA Announces January Income over Feed Cost Margin Triggers First 2019 Dairy Sa

WASHINGTON, March 6, 2019 ? The U.S. Department of Agriculture's Farm Service Agency (FSA) announced this week that the January 2019 income over feed cost margin was $7.99 per hundredweight, triggering the first payment for eligible dairy producers who purchase the appropriate level of coverage under the new but yet-to-be established Dairy Margin Coverage (DMC) program.

DMC, which replaces the Margin Protection Program for Dairy, is a voluntary risk management program for dairy producers that was authorized by the 2018 Farm Bill. DMC offers protection to dairy producers when the difference between the all milk price and the average feed cost (the margin) falls below a certain dollar amount selected by the producer.

Agriculture Secretary Sonny Perdue announced last week that sign up for 
DMC will open by mid-June of this year. At the time of sign up, producers who elect a DMC coverage level between $8.00 and $9.50 would be eligible for a payment for January 2019.

For example, a dairy operation with an established production history of 3 million pounds (30,000 cwt.) that elects the $9.50 coverage level for 50 percent of its production could potentially be eligible to receive $1,887.50 for January.

Sample calculation:
$9.50 - $7.99 margin = $1.51 difference
$1.51 times 50 percent of production times 2,500 cwt. (30,000 cwt./12) = $1,887.50

The calculated annual premium for coverage at $9.50 on 50 percent of a 3-million-pound production history for this example would be $2,250.

Sample calculation:
3,000,000 times 50 percent = 1,500,000/100 = 15,000 cwt. times 0.150 premium fee = $2,250

Operations making a one-time election to participate in DMC through 2023 are eligible to receive a 25 percent discount on their premium for the existing margin coverage rates.

"Congress created the Dairy Margin Coverage program to provide an important financial safety net for dairy producers, helping them weather shifting milk and feed prices," FSA Administrator Richard Fordyce said. "This program builds on the previous Margin Protection Program for Dairy, carrying forward many of the program upgrades made last year based on feedback from producers. We're working diligently to implement the DMC program and other FSA programs authorized by the 2018 Farm Bill."

Additional details about DMC and other FSA farm bill program changes can be found at farmers.gov/farmbill.


Wyo. Co. Pesticide Applicator Training Session and Re-certification course

Cornell Cooperative Extension of Wyoming County is offering a pesticide applicator training session and re-certification course on Thursday, April 4, 2019 from 8:15 AM to 12:15 PM at the Wyoming County Agriculture and Business Center. This session is geared for individuals planning to take the Core and Category Pesticide Certification Exam specific to the focus of their work. If applying for Core Re-certification credits, you must bring your Pesticide Certification ID card with you. This session will carry 3.50 Core Re-Certification Credits. This course is open to those seeking Private or Commercial Category Pesticide Applicator Certification.
1. Individual responsibilities with Cornell Cooperative Extension 
A. Please pre-register with Cornell Cooperative Extension of Wyoming County for the training session only, by calling Don Gasiewicz at 585-786-2251 x113 or emailing him at drg35@cornell.edu.There is a $20 fee for extension enrollees and a $30 fee for non-enrollees. Any questions regarding the certification class can be directed to Don as well. 
B. You need to purchase the required training manual(s) from the CCE office. Manuals for all categories must be ordered through CCE. Once you know which manual(s) you need, contact Don to purchase and/or order. Questions regarding which manual(s) you may need to order, must be directed the NYSDEC at 716-851-7220 
2. Individual responsibilities with New York State DEC 
A. DEC Pesticides Test. The pesticide exam is conducted by the DEC and is held at the Wyoming County Agriculture and Business Center on Thursday, April 4, 2019 at 1:00 PM for your convenience. 
B. NYSDEC requires advance registration to be eligible to take the certification exam. If you are planning to take the exam, you must first call the NYSDEC Pesticide Division at 716-851-7220 to discuss eligibility. 
C. If you are eligible, DEC will send you an exam packet, which you must fill out and return to them with your examination fee of $100. You must be pre-registered with DEC to take the exam. No walk-ins will be allowed. All questions regarding your certification should be directed to the DEC. Click here for flyer.


New Guidance for Mortality Disposal Issued

NYS Department of Ag and Markets has posted guidelines on disposal of livestock carcasses, in response to reports that some rendering companies have halted pickups from farms.

https://nwnyteam.cce.cornell.edu/submission.php?id=761&crumb=dairy|1

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