USDA is now accepting applications for the Dairy Margin Coverage (DMC) program, a voluntary risk management program for dairy farmers.
Sign-up runs through Dec. 11. DMC offers protection to dairy farmers when the difference between the all-milk price and the average feed price (the margin) falls below a certain dollar amount selected by the producer. DMC payments triggered for seven months in 2019 and three months so far in 2020.
Nation-wide, more than 23,000 operations enrolled in DMC in 2019 and more than 13,000 in 2020. In Minnesota, 94% of the state’s dairy farms enrolled (2,405 operations). In 2020, 79% of the state’s dairy farms enrolled (1,907 farms).
During a meeting in Chippewa Falls, Wis., last week, USDA undersecretary Bill Northey encouraged dairy farmers to sign up for the program.
“This year has been a market roller coaster for the dairy industry,” he said. “The Dairy Margin Coverage program is a valuable tool that dairy producers can use to manage risk.
“If you haven’t enrolled in previous years, we highly encourage you to check it out.”
Updated dairy decision tool
To determine the appropriate level of coverage for a specific dairy operation, farmers can use the recently updated online dairy decision tool. The decision tool is designed to assist producers with calculating total premium costs and administrative fees associated with participation in DMC. An online informational video is available, too.
Improvements to the decision tool, made in cooperation with representatives from the University of Minnesota and University of Wisconsin, include historical analysis that illustrates what DMC indemnity payments might have been had the program been available over the previous two decades.
The analysis indicates that over the course of time, DMC payments made to producers exceed premiums paid. These decision tool enhancements provide a more comprehensive decision support experience for producers considering DMC, according to USDA.
Lucas Sjostrom, executive director with Minnesota Milk Producers, said they are pleased to see Minnesota have a high number of DMC program enrollees. Minnesota has the highest percentage of dairy farms participating among top dairy states.
That boost, in part, could be attributed to the Minnesota Department of Agriculture’s Dairy Assistance Investment Relief Initiative program which provides financial assistance to small- to medium-sized dairy operations that participate in DMC.
“We do hope to see a reset to the base in a future bill from Congress,” Sjostrom said. “We have many farms that added sons and daughters and aren’t protected on half their milk, while new dairies or established dairies are fully protected. This is a fairness issue we hope Congress corrects.”
Minnesota Milk policy also asks for protection up to about a full tanker load of milk shipped per day, or about 12 million pounds.
Sjostrom said the DMC program is needed insurance for dairy farms.
“Don’t look at next year’s markets to determine if you have a return on investment with expected payments,” he said. “You don’t know when the next pandemic or other market-twisting event will happen.”