Ag Policy Blog

USDA announced signup Wednesday for the Dairy Margin Coverage (DMC) and detailed some changes to expand the program to fairy farmers, including retroactively paying farmers for recent increases in production, as well as retroactively paying farmers for a change in price calculations for alfalfa as well.

Supplemental Dairy Margin Coverage will allow producers with under 5 million pounds of annual production who are enrolled in DMC to receive additional payments accounting for their increases in production since 2014. The payments will be retroactive to January 2021. USDA stated Supplemental DMC will provide $580 million to help smaller and medium-sized producers who had expanded production but were not able to enroll that additional production until now.

"Dairy Margin Coverage is a critical safety-net for producers, and catastrophic coverage is free. These DMC updates build on other efforts of the Biden-Harris Administration to improve DMC and other key USDA dairy programs,"?Under Secretary for Farm Production and Conservation Robert Bonnie said. "We encourage dairy producers to make use of the support provided by enrolling in supplemental coverage and enroll in DMC for the 2022 program year."?

The National Milk Producers Federation is urging dairy producers to "sign up for the maximum coverage" for DMC in 2022. NMPF stated the changes in DMC "make the program even more valuable for producers seeking protection against unforeseen market risks."

DMC for 2022 also will add the premium-quality alfalfa price into the DMC feed-cost formula, which NMPF stated would be an improvement over the current formula that uses a 50-50 blend between the premium quality price and the regular price. Using this formulate, USDA will make retroactive payments to producers to January 2020.

Jim Mulhern, president and CEO of NMPF, called signup for DMC "a no-brainer for 2022," and said DMC offers cost-effective margin protection for small and medium-sized dairy producers, as well as catastrophic coverage for larger dairies.

"This year has illustrated just how valuable this program is for those producers that can take advantage of it, and DMC will once again be an essential part of many farmers' risk management in the coming year. We thank Congress and USDA for making the program stronger and helping dairy farmers in challenging times," Mulhern said.

Minnesota Sens. Amy Klobuchar and Tina Smith, along with Rep. Angie Craig, said Congress included Supplemental DMC in the Consolidated Appropriations Act of 2021. The lawmakers praised USDA for opening enrollment for the program.

NMPF projects more than $1.1 billion will be paid to producers under DMC for the 2021 program, based on USDA data. Yet, last year, just under 25% of dairy operations with established history had not enrolled in DMC.

Supplemental DMC will require producers to revise their 2021 contracts before enrolling in the 2022 program year. Producers can revise their 2021 contracts and apply for 2022 by contacting their local USDA Service Center. The signup period for DMC runs Dec. 13 to Feb. 18, 2022.

USDA's Dairy Margin Coverage on-line decision tool https://dmc.dairymarkets.org/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

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