Ag Policy Blog

Dairy farmers can enroll for the 2023 Dairy Margin Coverage (DMC) program, and USDA is touting the payments being triggered for the program this year.

DMC "helps producers manage changes in milk and feed prices," the department stated.

DMC is a risk management program for dairy farmers that "helps producers manage changes in milk and feed prices, USDA stated. The program "offers protection to dairy producers when the difference between the all-milk price and the average feed price (the margin) falls below a certain dollar amount selected by the producer."

Changes were made last year by USDA's Farm Service Agency (FSA) to offer a new Supplemental DMC program. The feed cost formula was also adjusted to address retroactive, current and future feed costs, USDA stated.

Sign up for DMC began Monday and ends Dec. 9, 2022.

"Dairy producers are the backbone of many agricultural communities across rural America," FSA Administrator Zach Ducheneaux said. "Dairy Margin Coverage provides critical assistance to our nation's small- and mid-sized dairies, helping make sure they can manage the numerous and often unpredictable uncertainties that adversely impact market prices for milk. This year showed why enrolling in DMC makes good business sense. Early in the year, some economists predicted that DMC would not trigger any payments for the calendar year, but then fast forward to now, when we're starting to see payments trigger and a return on investment."

USDA stated DMC payments have triggered for August to more than 17,000 dairy operations with a payout of more than $47.9 million. According to DMC margin projections, an indemnity payment is projected for September as well, USDA stated. At $0.15 per hundredweight for $9.50 coverage, risk coverage through DMC is a relatively inexpensive investment, USDA added.

At 17,000 or so dairy farms enrolled, that's about 54% of the roughly 31,600 dairy farms in the U.S.

DMC offers different levels of coverage, even an option that is free to producers, aside from a $100 administrative fee. Limited resource, beginning, socially disadvantaged or a military veteran farmers or ranchers are exempt from paying the administrative fee, if requested. To determine the appropriate level of DMC coverage for a specific dairy operation, producers can use the?online dairy decision tool.?

USDA introduced Supplemental DMC last year. That has provided $42.8 million in payments to better help small- and mid-sized dairy operations that had increased production over the years but were not able to enroll the additional production. Supplemental DMC is also available for 2023, USDA stated.

Supplemental DMC coverage is applicable to calendar years 2021, 2022 and 2023. Eligible dairy operations with less than 5 million pounds of established production history may enroll supplemental pounds, USDA stated.

For producers who enrolled in Supplemental DMC in 2022, the supplemental coverage will automatically be added to the 2023 DMC contract that previously established a supplemental production history.

Producers who did not enroll in Supplemental DMC in 2022 can do so now, USDA stated. Producers should complete their Supplemental DMC enrollment before enrolling in 2023 DMC. To enroll, producers will need to provide their 2019 actual milk marketings, which FSA uses to determine established production history.

USDA also stated FSA will continue to calculate DMC payments using updated feed and premium hay costs, making the program more reflective of actual dairy producer expenses.??These updated feed calculations use 100% premium alfalfa hay rather than 50%.?The benefits of these feed cost adjustments were realized in the recent August 2022 margin payment as current high feed and premium hay costs were considered in payment calculations.

For more information on DMC, contact your local USDA Service Center or visit the?DMC website:

https://www.fsa.usda.gov/…

FARM BUREAU DAIRY POLICY

The American Farm Bureau Federation earlier this month released its recommendations for the 2023 farm bill. In dairy policy, AFBF stated the group supports retaining DMC with the supplemental and feed-cost updates.

AFBF would also like to see DMC's Tier 1 limit of 5 million pounds of milk increased to a higher volume level.

AFBF also wants to see updated production averages to a three-year rolling average or current production used for payment calculations.

Also see "Forum Drives Prospect for Changes to the Federal Milk Marketing Order,"

https://www.dtnpf.com/…

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

Follow him on Twitter @ChrisClaytonDTN

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