Due to the prolonged and extensive impacts of weather events this year, the U.S. Department of Agriculture (USDA) today extended the deadline to December 20 for producers to enroll in the Dairy Margin Coverage (DMC) program for the 2020 calendar year. The deadline had been December 13. USDA announced is also continuing to accept applications for the Market Facilitation Program through December 20.
On Thursday the USDA announced the Farm Service Agency began issuing payments under the Dairy Margin Coverage.
The program 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. To date, nearly 10,000 operations have signed up for the new program, and FSA has begun paying approximately $100 million to producers for January through May.
“Times have been especially tough for dairy farmers, and while we hope producers’ margins will increase, the Dairy Margin Coverage program is providing support at a critical time for many in the industry,” said Bill Northey, USDA Under Secretary for Farm Production and Conservation. “With lower premiums and higher levels of assistance than previous programs, DMC is already proving to be a good option for a lot of dairy producers across the country. USDA is committed to efficiently implementing the safety net programs in the 2018 Farm Bill and helping producers deal with the challenges of the ever-changing farm economy.”
The May 2019 income over feed cost margin was $9.00 per hundredweight (cwt.), triggering the fifth payment for eligible dairy producers who purchase the $9.50 level of coverage under DMC. Payments for January, February, March and April also were triggered.
With the 50 percent hay blend, FSA’s revised April 2019 income over feed cost margin is $8.82 per cwt. The revised margins for January, February and March are, respectively, $7.71, $7.91 and $8.66.
DMC provides coverage retroactive to January 1, 2019, with applicable payments following soon after enrollment.
The U.S. Department of Agriculture’s Farm Service Agency (FSA) opened enrollment for the Dairy Margin Coverage (DMC) program on June 17 and has started issuing payments to producers who purchased coverage. Producers can enroll through Sept. 20, 2019.
The United States Department of Agriculture reports the milk/feed margin under the Dairy Margin Cover (DMC) program for April was $8.96, which would result in a payment of 54¢ for dairy farmers signing up for $9.50/coverage.
The April margin calculation is based on corn at $3.52/bu, alfalfa at $199/ton and soybean meal at $304.26. The U.S. all-milk price is $17.70 for April.
Sign-up for the program begins Monday, June 17 at FSA offices.
The webinar covering dairy risk tools, including dairy revenue protect and dairy margin coverage programs was held on Friday, May 17 with 115 in attendance. The webinar was recorded and each presentation can be viewed at:
Part 1 with Dr. Marin Bosic:
Part 2 with Cassie Monger and Josh Newton:
Here are some “take-home” messages for each program.
USDA’s Farm Service Agency (FSA) announced last week that the February 2019 income over feed cost margin was $8.22 per hundredweight (cwt.), triggering the second payment for 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.
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 $8.50 and $9.50 would be eligible for a payment for February 2019.
For example, a dairy operation that chooses to enroll an established production history of 3 million pounds (30,000 cwt.) that elects the $9.50 coverage level on 95 percent of production would receive $3,040 for February.
$9.50 – $8.22 margin = $1.28 difference
$1.28 x 95 percent of production x 2,500 cwt. (30,000 cwt./12) = $ 3,040
DMC premiums are paid annually. The calculated annual premium for coverage at $9.50 on 95 percent of a 3-million-pound production history for this example would be $4,275.
3,000,000 x 95 percent = 2,850,000/100 = 28,500 cwt. x 0.150 premium fee = $4,275
The dairy operation in the example calculation will pay $4,275 in total premium payments for all of 2019 and receive $6,626.25 in Dairy Margin Coverage payments for January and February combined. Additional payments will be made if calculated margins remain below the $9.50/cwt level.
All participants are also required to pay an annual $100 administrative fee in addition to any premium, and payments will be subject to a 6.2% reduction to account for federal sequestration.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. For the example above, this would reduce the annual premium by $1,068.75.
“The Dairy Margin Coverage program will provide an important financial safety net for dairy producers, helping them weather shifting milk and feed prices,” FSA Administrator Richard Fordyce said. “We continue to work diligently to implement the DMC program and other FSA programs authorized by the 2018 Farm Bill.”