Dairy farmers have endured four and a half years of low milk prices, and now Congress is doing something to help. With the signing of the 2018 Farm Bill, Congress enhanced the former Margin Protection Program for Dairy Producers and created the Dairy Margin Coverage program. DMC is a voluntary program that makes payments when the national average income-over-feed-cost margin falls below a farmer’s selected coverage level.
“The new Dairy Margin Coverage program offers very appealing options for all dairy farmers to reduce their net income risk due to volatility in milk or feed prices,” says Mark Stephenson, director of dairy policy analysis at University of Wisconsin-Madison. “Higher coverage levels, monthly payments and more flexible production coverage options are especially helpful for the sizable majority of farms who can cover much of their milk production with the new 5 million-pound maximum for Tier 1 premiums. This program deserves the careful consideration of all dairy farmers.”
The 2019 DMC sign-up begins June 17. USDA is encouraging dairy farmers to visit their local Farm Service Agency office and complete a CCC-801 DMC contract, elect a coverage level, and pay the $100 administrative fee unless they are eligible for a waiver.
DMC has increased the margin coverage levels to the $9.50 level for Tier 1 production for up to 5 million pounds of milk while giving dairy farmers the ability to cover production history in 5% increments up to 95%. For dairy operations that choose to lock in coverage levels until 2023, a 25% discount is applied to the premium fees.
On May 1, U.S. Agriculture Secretary Sonny Perdue announced the availability of a new web-based tool developed in partnership with UW-Madison to help dairy producers evaluate various scenarios using different coverage levels through the DMC program. The decision tool assists producers with calculating total premium costs and administrative fees associated with participation in DMC. It also forecasts payments that will be made during the coverage year.
“With sign-up for the DMC program just weeks away, we encourage producers to use this new support tool to help make decisions on participation in the program,” Perdue says. “Dairy producers have faced tough challenges over the years, but the DMC program should help producers better weather the ups and downs in the industry.”
Last fall, Stephenson spoke at World Dairy Expo and told an audience of 175 dairy farmers the new dairy program has a 400% return on investment. Stephenson says it’s a no-brainer for dairy farmers who sell 5 million pounds of milk or less per year to sign up for the new DMC program.
The bottom line is the government is finally offering a safety net to small and medium-size dairy farms, and it would be smart to take advantage of the program and sign up.
For more information, access the tool at fsa.usda.gov/dmc-tool. For DMC sign-up, eligibility and related program information, contact your local FSA Ag Service Center.
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