Ag Policy Blog

As of Tuesday, dairy farmers aren't signing up for Dairy Margin Coverage at the level expected, leading USDA to announce the department has extended the enrollment period for the 2022 sign up for DMC and the Supplemental DMC program.

USDA cited that enrollment for the 2022 DMC currently is only at 48% of the 2021 enrollment. USDA noted producers who signed up for DMC in 2021 received margin payments for every month from January through November for a total of $1.2 billion with an average payment of $60,275 per operation.

The Farm Service Agency had opened up enrollment for DMC and SDMC in December. The program is meant to help manage risk involving the spread between milk prices and feed costs. The deadline for enrollment now has been extended to March 25.

"Over the past two years, American dairy farmers have faced unprecedented uncertainty, from the ongoing pandemic to protracted natural disasters. As producers continue to manage these interconnected challenges, FSA has tools at the ready to provide critical support," said FSA Administrator Zach Ducheneaux. "We are encouraging dairy operations to take advantage of the extended deadline and join the 8,969 operations that have already enrolled for 2022 coverage. At 15 cents per hundredweight at the $9.50 level of coverage, DMC is a very cost-effective risk management tool for dairy producers."

Testifying before a House Agriculture Subcommittee on Tuesday, USDA Undersecretary for Farm Programs Robert Bonnie was asked if USDA has any safety net programs to help offset rising input costs. Bonnie pointed to DMC as one example.

House Agriculture Committee members last month also had asked Agriculture Secretary Tom Vilsack about ways to expand DMC to enroll larger dairy farm operations as well.

The National Milk Producers Federation also is encouraging dairy farmers to enroll. The group also reminded producers they still need to touch base with their local FSA office even if they locked in the five-year coverage in 2019.

"Dairy farmers thank USDA and Secretary Vilsack for extending signup for this year's Dairy Margin Coverage Program in order to maximize producer signup for this important program," said Jim Mulhern, president and CEO of NMPF. "DMC offers cost-effective margin protection for small and medium-sized producers and inexpensive catastrophic coverage for larger dairies. It provides critical protection against unforeseen market disruptions -- and if the past two years have shown anything, it's that unforeseen market disruptions can happen. We urge all producers to sign up for DMC protection, part of a suite of NMPF-supported, federally backed risk-management that also includes the Dairy-RP and LGM-Dairy programs."

NMPF pointed out producers have multiple options for coverage each year. Basic catastrophic coverage of $4/cwt. is free, except for the $100 annual administrative fee. Farms can insure their first 5 million pounds of milk production history, designated as Tier I, in 50-cent increments from $4/cwt. up to $9.50/cwt. Annual production above 5 million pounds falls into Tier II. Coverage options in Tier II range from $4/cwt. to $8/cwt. Producers must also select a coverage percentage of the dairy operation's production history ranging from 5% to 95%, in 5% increments.

USDA has also changed the DMC feed cost formula via final rule published on Dec. 13, 2021, to better reflect the actual cost dairy farmers pay for high-quality alfalfa hay.? FSA now calculates payments using 100% premium alfalfa hay rather than 50%.?In December 2021, following publication of the new feed cost policy, $102 million was paid to producers as a result of the revised high quality alfalfa?feed cost formula.

The amended feed cost formula will make DMC payments more reflective of actual dairy producer expenses.

For more information see FSA Dairy Programs page: https://www.fsa.usda.gov/…

FSA's on-line decision tool: https://dmc.dairymarkets.org/…

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

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