RISK
MANAGEMENT AGENCY (RMA), DEPARTMENT OF AGRICULTURE
AUTHORIZATION:
Federal
Agriculture Improvement and Reform Act of 1996, Title I; Agricultural
Market Transition Act, Subtitle H, Public Law 104-127; Agricultural
Risk Protection Act of 2000, Public Law 106- 224.
The
purpose of the Dairy Options Pilot Program (DOPP) is to educate
dairy producers in the use of options contracts as risk management
tools and to ascertain the usefulness of options to dairy producers
in various regional markets.
TYPES
OF ASSISTANCE:
Direct Payments for Specified Use. Place Cursor Here for Definition
USES
AND USE RESTRICTIONS:
Funds
will be used to share the cost of premium for 'put' options purchased
by DOPP participants and for a portion of the brokers' fees to conduct
and execute transactions. Funds may be used to purchase only 'put'
options on milk futures contracts. Other discretionary expenses
will be incurred by RMA to operate the program such as those associated
with the DOPP's required training sessions.
ELIGIBILITY
REQUIREMENTS:
Applicant
Eligibility: To be eligible for any benefits
under this program, applicants must be dairy farmers (i.e., an individual,
entity, or joint operation, which as owner, operator, landlord,
tenant, or sharecropper is entitled to share in the production available
for marketing from the dairy farm, or share in the proceeds thereof)
who: (1) Are eligible for a production flexibility contract, a marketing
assistance loan or any other assistance under Title I of the Federal
Agriculture Improvement and Reform Act of 1996; (2) volunteer to
participate in this program; (3) operate a dairy farm located in
a county selected for the pilot program; and (4) have documented
production history of at least 100,000 pounds of production over
any consecutive 6-month period during the most recent 12 months.
Beneficiary
Eligibility: Dairy farmers.
Credentials/Documentation:
Dairy farmers must certify that they are eligible for the DOPP
and that their farm produced at least 100,000 pounds of milk over
a consecutive 6-month period during the most recent 12 months.
Pre-application
Coordination: The DOPP application and participation
agreement materials include Form CCC-320 and a brochure explaining
DOPP, along with instructions. Consultation or assistance is available
from RMA and from extension agents to aid in preparing these forms.
No informal preapplication consultation is necessary. This program
is excluded from coverage under E.O. 12372.
Application
Procedure: The DOPP application materials
will be mailed to producers in counties where the program operates.
Award
Procedure: Each round of the program will
last up to 12 months for each participant and operate for up to
3 years in each pilot county.
Deadlines:
Farmers have one month after the county official training date
to return their signed application and a copy of their production
records to RMA.
Range
of Approval/Disapproval Time: Farmers should
expect a response within 3 weeks of RMA's receipt of their applications.
Appeals:
None.
Renewals:
None.
ASSISTANCE
CONSIDERATIONS:
Formula
and Matching Requirements: The program has no
statutory formula. The proposed cost-sharing arrangement between
RMA and participating dairy farmers calls for RMA to pay for 80
percent of premiums and up to $30 in broker fees for each options
contract purchased under the DOPP. The farmer pays for 20 percent
of the premium and any broker fees in excess of $30 per contract.
This program has no matching requirements for State and local governments.
Length
and Time Phasing of Assistance: This assistance
is available to farmers in selected counties from the date application
materials are mailed to farmers in those counties until all options
have been liquidated. All DOPP options must be purchased within
4 months of the date of the training session in each county. The
assistance is paid to the farmer's broker on behalf of the farmer
on a transaction-by- transaction basis.
POST
ASSISTANCE REQUIREMENTS:
Reports:
None.
Audits:
RMA's Office of Risk Compliance will conduct random audits of
participating producers' and brokers' trading activity to verify
compliance with the DOPP agreements.
Records:
None.
FINANCIAL
INFORMATION:
Account
Identification: 12-4336-0-3-351.
Obligations:
(Direct payments) FY 01 $3,502,809; FY 02 est $15,000,000 for
options pilot program expansion; and FY 03 est $9,000,000.
In DOPP Round I, 1,450 dairy producers were trained; 428 of those
dairy producers bought 1,700 milk put options. During DOPP Round
II, 1,226 dairy producers were trained; 129 of those dairy producers
bought 310 milk put options due to low prices. An increased number
of dairy producers attended training during Round III; 790 of those
dairy producers bought 2,816 milk put options.
REGULATIONS,
GUIDELINES, AND LITERATURE:
Brochure - "Got Options? Announcing the Dairy Options Pilot Program".
The program was operated to fund milk put options purchases for
dairy producers in 38 counties in a total of seven States during
the original Round of DOPP (Round I). The program operated between
6 to 8 months in each State. For Round II, the program was expanded
to include 61 new counties and included a total of 32 States. None
of the original (Round I) counties were chosen to participate in
Round II of the program. DOPP Round III was piloted in 275 counties
and 39 states during FY 2001. An additional 25 counties were chosen
by the Secretary of Agriculture for implementation during FY 2002.
Counties from Rounds I, II, and III are included in the 300 total
counties in 40 states during FY 2002 because DOPP will continue
to operate in these counties, as directed by Congress.
