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USDA offers advanced info for dairy margin coverage for dairy producers

By: Jake Putnam
Published in Blog on  April 26, 2019

Dairy in Raft River, Idaho

Washington—The Nation’s Dairy farmers are waiting for US Department of Agriculture to finalize regulations for the new Dairy Margin Coverage program in the 2018 Farm Bill.

Congress approved the US Farm Bill in December. Dairy farmers were supposed to start signing up for the DMC, but the program was delayed with a sign-up starting no later than June 17th.

The DMC is designed to give dairy producers an improved form of Dairy risk management for their margins, that’s the difference between the all-milk price and the average cost of feed. The Dairy Margin coverage program allows producers to select the dollar amount in the margin to act as the trigger for payments.

“When they start to sign up, those are the decisions they’re going to be making, is, ‘what is my price selection that I want and what percentage of my production do I want to be covered under that program,’ and that will be for the entire calendar year for January 1 to December 31,” said Steve Petersen, of the USDA Farm Service Agency.

The program is still in the implementation phase. Producers are scheduled to start sign-up of DMC in mid-June. So Petersen says this gives producers a rare opportunity to know in advance if they are eligible for DMC coverage for any month in the first half of 2019 where income over feed costs margins goes below their selected coverage margins.

Take February for instance, Petersen says that months income over feed-costs margin was $8.22 a hundredweight. So in the context of dairy producer signup dairy margin coverage later this year could be much higher with help in February.

“Changes under the Farm Bill was an increase in the pricing from $8 was the maximum coverage price up to $9.50. So if you have elected a coverage level of $8.50 or higher, technically you would be able to receive some assistance for that February margin,” said Petersen.

And in terms of USDA projections for income over feed cost margins for 2019, Chief USDA economist Rob Johansen says the outlook from the April supply and demand estimate shows a drop.

“We’re expecting the margin for the dairy margin coverage program to fall below the $9.50 for quarter two and quarter three,” said Johansen.

Before the margin is forecasted to rise above the $9.50 cent trigger point in the 4th quarter of 2019 due to a predicted increase in all-milk price. Petersen adds that since this is the initial year of dairy margin coverage under the latest five-year Farm Bill, producers are encouraged to get information and conduct signups for year-one at their local Farm Service Agency office.

“We are hoping in the future to be able to make access to DMC online through farmers.gov but at this time we’re just currently working on formulating the software. We’re hoping to make that link later on,” said Petersen

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