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Dairy margin safety net signups underway

By: Jake Putnam
Published in Blog on  June 19, 2019

Washington—Sign-ups started this week for the new Dairy Margin Coverage program across the nation.

The new program is the foundation of the dairy safety net that helps dairy farmers deal with the volatility of milk and feed prices and is operated by the U.S. Department of Agriculture’s Farm Service Agency.

“We’re now ready for farmers to come in and sign up,” said FSA Administrator Richard Fordyce

The 2018 Farm Bill allowed USDA to design the new DMC for the ground floor up and replaces the old Margin Protection Program for Dairy. 

The new program offers protection to dairy farms when the difference between the all-milk price and the average feed cost falls below a certain dollar amount chosen by the farmer.

“We’ve worked hard to make sure that the Dairy Margin program was the first program under the 2018 Farm Bill that we just rolled out,” said Fordyce.

US Ag Secretary Sonny Perdue says the safety net for dairy farmers is a USDA priority.

“In February I committed to opening signup of the new Dairy Margin Coverage program by June 17, I am proud that our FSA staff met that challenge as one of the Department’s top Farm Bill implementation priorities since President Trump signed it last December,” said Perdue.

Perdue said that with an environment of low milk prices, high economic stress, the new safety net program with higher coverage levels and lower premiums, it’s the right time for dairy farmers to sign up.

“For smaller dairies, the choice is a no-brainer as the retroactive coverage through January has already assured producers that the 2019 payments will exceed the required premiums,” said the Secretary of Agriculture.

The program provides coverage retroactive to January 1st, with applicable payments following right after enrollment. At the time of signup, dairy producers can choose between the $4.00 to $9.50 coverage levels.

“We figure the margin each month and so when producers come in to make their elections, so what coverage levels do they want to insure at, and what percentage, they’ll know retroactively back to January, what those margins are,” said Fordyce

The Farm Bill also allows producers who participated in MPP-Dairy from 2014 to 2017 to receive repayment or credit for part of the premiums paid into the program. FSA has given premium reimbursements to producers since last month and farmers that elect the 75 percent credit option now have that credit applied toward their 2019 DMC premiums.

The Department has built in a 50 percent blend of premium and supreme alfalfa hay prices with the alfalfa hay price used under the prior dairy program to provide a total feed cost that more closely aligns with hay rations used by many producers. 

At a milk margin minus feed cost of $9.50 or less, payments are possible. With the 50 percent hay blend, FSA’s revised April 2019 income over feed cost margin is $8.82 per hundredweight. The revised margins for January, February and March are, respectively, $7.71, $7.91 and $8.66 – triggering DMC payments for each month.

DMC payments will be reduced by 6.2 percent in 2019 because of a sequester order required by Congress and issued in accordance with the Balanced Budget and Emergency Deficit Control Act of 1985.

DMC offers catastrophic coverage comes at no cost to the producer, other than the annual $100 administrative fee. Producers can opt for greater coverage levels for a premium in addition to the administrative fee. 

Operations owned by limited resource, beginning, socially disadvantaged or veteran farmers and ranchers may be eligible for a waiver on administrative fees. Producers have the choice to lock in coverage levels until 2023 and receive a 25-percent discount on their DMC premiums.

To assist producers in making coverage elections, USDA partnered with the University of Wisconsin to develop a DMC decision support tool, which can be used to evaluate various scenarios using different coverage levels through DMC.

All dairy operations in the United States are eligible for the DMC program. An operation can be run either by a single producer or multiple producers who commercially produce and market cows’ milk.

Eligible dairy operations must have a production history determined by FSA. For most operations, the production history is based on the highest milk production in 2011, 2012 and 2013. Newer dairy operations have other options for determining production history. Producers may contact their local FSA office to get their verified production history.

Dairy producers also are reminded that 2018 Farm Bill provisions allow for the dairy operation to participate in both FSA’s DMC program and the Risk Management Agency’s Livestock Gross Margin program. There are also no restrictions from participating in DMC in conjunction with any other RMA insurance products.

On December 20, 2018, President Trump signed into law the 2018 Farm Bill, which provides support, certainty, and stability to our nation’s farmers, ranchers, and land stewards by enhancing farm support programs, improving crop insurance, maintaining disaster programs and promoting and supporting voluntary conservation. FSA is committed to implementing these changes as quickly and effectively as possible, and today’s updates are part of meeting that goal.

For more information, visit farmers.gov DMC webpage or contact your local USDA service center. To locate your local FSA office, visit farmers.gov/service-locator.

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