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Economist Expects Strong Dairy Program Signups

By: Jake Putnam
Published in Blog on  June 21, 2019

Washington--Signups for the Dairy Margin Coverage program started this past Monday and so far farmer signups have been steady.

 American Farm Bureau Federation economist Michael Nepveux expects a strong signup period for the Coverage program and says the new program is based on dairy producers’ average margins.

“Producers can elect a certain coverage level ranging from $4.00 to $9.50 a hundredweight. And, if that income over costs margin falls below that, producers are eligible for a payment. And this program has two different tiers of premiums. The tier-one premiums, which are more affordable, cover up to the first five million pounds of milk. Anything above that falls under the tier-two premiums,” said Nepveux.

Producers can cover up to 95 percent of their production history under the program. Nepveux says producers can sign up now for the program.

“Most people are expecting a pretty high participation rate, particularly for that first five million pounds. We’ve already run the numbers on the first four months, which is what we have data for so far. Under the new DMC program, each of those first four months is expected to trigger a payment. If a farmer were to enroll at the $9.50 coverage rate, he would already have made back his money from enrolling in the program as well,” added Nepveux.

Authorized by the 2018 Farm Bill, USDA made changes to better reflect the costs of feeding dairy cattle.

“The supreme and premium alfalfa hay prices, they moved to a 50 percent blend, incorporating those higher values with the original alfalfa hay price. They did this to get a better reflection on what producers are actually feeding their cows. So, one thing you can expect with this is that there are going to be ultimately higher payments as a result of this change,” said Nepveux.

DMC offers catastrophic coverage at no cost to the producer, other than an 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.

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