Sign-up for the new Dairy Margin Coverage (DMC) program is well underway, and sign-ups have been steady since enrollment began on June 17. USDA reports that about one-half of all dairy producers who have signed up also have taken the five-year sign-up option.

That option allows enrollees to take advantage of the 25 percent discount in DMC premiums by making the longer-term coverage choice. These early numbers provided by USDA indicate that dairy producers are finding the new DMC program beneficial for their operation from a risk management standpoint.

There’s still time
For those dairy producers who have not yet gone into their local Farm Service Agency (FSA) office to choose their 2019 DMC participation option, the monthly margin levels reported by USDA continue to show additional payments accruing for those who choose the $9.50 coverage level. The DMC payments that will be made for the $9.50 coverage level are:
• January — $1.79 per hundredweight (cwt.)
• February — $1.59 per cwt.
• March — 84 cents per cwt.
• April — 68 cents per cwt.
• May — 50 cents per cwt.

These payment rates may be subject to a reduction as a result of a sequester order (6.2 percent reduction for 2019). Dairy producers signed up in 2019 should begin to see the first DMC payments in the next month or two.

For a dairy operation with the ability to cover 5 million pounds of production history at the $9.50 coverage level, the payments for January through May alone will total $22,500 before sequestration. This factors in the 2019 premium cost of $5,625 (if the operation signs up for all five years to receive the 25 percent premium discount) and the $100 administrative fee.

It is important to note that although payments for the remaining months of 2019 are less likely, the DMC coverage will provide additional payments if milk prices fall or feed costs climb more than expected at this time.

Better milk prices preferred
DMC payments can help dairy operations weather tough financial periods, but dairy producers will always be in a stronger financial position when higher market returns keep these payments from being made.

Dairy producers need to think through how they participate in the DMC program relative to other producers across the country. It is good to see the early interest in the DMC program as producers recognize the stronger safety net it provides.

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(c) Hoard's Dairyman Intel 2019
July 8, 2019
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