Price chart of uncertainty.
March 27, 2020

Dairy Margin Coverage Payment Expected March Through December

 |  By: Jim Dickrell

Oh, what a difference a few months make. Last year, few people—from farmers to economists—expected Dairy Margin Coverage (DMC) payments in any months in 2020.

Twelve weeks later, with the onset of the COVID-19 outbreak, it now appears DMC payment could be made March through December at the $9.50/cwt coverage level. The highest payment, based on current futures market prices, would be in June at $1.71/cwt, says Michael Nepveux, an economist with the American Farm Bureau Federation. The lowest payment would come in December.

Because of low expectation of DMC payments last year, many fewer farmers signed up for DMC coverage this year. Only 13,077 dairy farmers signed up for DMC coverage this year, 10,000 fewer than last year. In 2020, the enrolled farmers had 56 percent of estimated milk production history covered compared to 82% last year.

Nepveux notes that 76 billion pounds of milk are covered by Dairy Revenue Protection insurance and could receive indemnities in the nearby calendars quarters given current market prices.

Earlier this week, Marin Bozic, a University of Minnesota dairy economist, urged producers to take risk management measures now to lock in prices through the first half of 2021. Efforts are also underway by the National Milk Producers Federation to re-open enrollment in the 2020 DMC program.

You can read all of Nepveux’s analysis here.