The third payment has been triggered for dairy producers who purchase the appropriate level of coverage under the new Dairy Margin Coverage program.
DMC, which replaces the Margin Protection Program for Dairy (MPP-Dairy), 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.
The March 2019 income over feed cost margin was $8.85 per hundredweight (cwt).
“I encourage all dairy operations to sign up for DMC when we begin accepting applications in June,” said FSA Administrator Richard Fordyce. “Under certain coverage levels, the amount to be paid to dairy farmers for the months of January, February and March already exceed the cost of the premium.”
The signup period for DMC opens June 17, 2019. Dairy producers who elect a DMC coverage level between $9 and $9.50 would be eligible for a payment for January, February and March 2019.
For example, a dairy operation that chooses to enroll an established production history of 3 million pounds (30,000 cwt.) and elects the $9.50 coverage level on 95% of production would receive $1,543.75 for March
$9.50 - $8.85 margin = $0.65 difference
$0.65 x 95% of production x 2,500 cwt. (30,000 cwt./12) = $1,543.75
DMC premiums are paid annually. The calculated annual premium for coverage at $9.50 on 95% of a 3-million-pound production history for this example would be $4,275.
3,000,000 x 95% = 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 $8,170 in DMC payments for January, February and March 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% discount on their premium for the existing margin coverage rates. For the example above, this would reduce the annual premium by $1,068.75.
View the DMC decision support tool for more information.
On May 3, FSA announced that dairy producers who had coverage under the Margin Protection Program for Dairy are eligible to receive a repayment for part of the premiums paid into the program.
To be eligible for this repayment, which was authorized by the 2018 Farm Bill, a dairy operation must have participated in the MPP-Dairy during any calendar year from 2014 through 2017, have the repayment calculated and verified by FSA and elect one of two options by Sept. 20, 2019. Operations whose established production history has been transferred to an heir or new owner also are eligible.
An operation’s repayment amount is calculated for each applicable calendar year in which that dairy participated in MPP-Dairy, from 2014 through 2017. The repayment amount is equal to the difference between the total amount of premiums paid by the dairy operation for each applicable calendar year of coverage and the total amount of payments made to the MPP-Dairy participating dairy operation for that applicable calendar year.
An operation either can elect to receive 50% of the repayment amount as a cash refund or take 75% of the amount as a credit that can be used toward premiums for the new Dairy Margin Coverage (DMC) Program.
Both MPP-Dairy reimbursement options will be subject to a 6.2% sequestration rate.
“USDA recognizes that dairy producers have faced tough challenges over the years, so we’re providing them some help,” said FSA Administrator Richard Fordyce. “This repayment for part of past premiums paid, coupled with the new Dairy Margin Coverage Program and other programs, should help producers better weather the ups and downs in the industry.”
Eligible dairy producers soon will receive a letter from FSA, outlining their repayment options.