money
June 14, 2019

Dairy Margin Coverage Program Enrollment To Begin

 |  By: Anna-Lisa Laca

Many dairy producers are hopeful that the Dairy Margin Coverage (DMC) program through the 2018 Farm Bill will provide a better safety net. After months of waiting, producers will be able to begin enrollment at local Farm Services Agency offices beginning Monday, June 17. 

“In February I committed to opening signup of the new Dairy Margin Coverage program by June 17, I am proud to say that our FSA staff worked hard to meet that challenge as one of the Department’s top Farm Bill implementation priorities since President Trump signed it last December.” said Secretary Perdue. “With an environment of low milk prices, high economic stress, and a new safety net program with higher coverage levels and lower premiums, it is the right time for dairy producers to seriously consider enrolling when signup opens. For many smaller dairies, the choice is probably a no-brainer as the retroactive coverage through January has already assured them that the 2019 payments will exceed the required premiums.”

Below are some frequently asked questions we compiled for your convenience:

What is DMC? A new version of the Margin Protection Program (MPP), DMC is a voluntary program that makes payments when the national average income-over-feed-cost margin falls below a farmer-selected coverage level. ) Coverage is now available from $4 per hundredweight to as high as $9.50 per hundredweight. Unlike MPP, program payments may be triggered monthly and are made if the DMC margin falls below the farmer’s elected coverage level.

How much milk can I cover with the program? Coverage can range from 5% to 95% of a farm’s milk production history, but can only be covered in 5% increments. For example, you can cover 85%, but you couldn’t cover 87% of your production.

Can you explain Tier 1 and Tier 2 coverage? Tier 1 coverage is the first 5 million pounds of production covered by a farm. DMC coverage thresholds for tier 1 production were raised to $9.50. Coverage for Tier 2 remains capped at $8 per hundredweight, however John Newton of the American Farm Bureau Federation says the program is designed to encourage coverage at the $5 and $4.50 levels for farmers covering more than 5 million pounds of milk.

What’s this premium discount I’ve heard of? When a farm enrolls in DMC they may receive a 25% premium discount if they make a one-time election for both the coverage level and the amount of milk enrolled in the program. For example, a farmer electing the Tier 1 $9.50 coverage option would receive a 25% discount on premiums for all five coverage years – reducing the premium from 15 cents to 11.25 cents per hundredweight – if a one-time election is made.

Is this program really better than MPP? Newton pulled together these charts which compare net benefits, i.e., program payments minus premiums, from DMC $9.50 coverage to $8 coverage for both the Bipartisan Budget Act-improved MPP and the original MPP from 2015 to October 2018.

What's the new hay calculation? 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.

Can I participate in DMC and LGM-Dairy? Yep. The farm bill fully removes the restriction on participation in both the DMC and the Livestock Gross Margin-Dairy (LGM-Dairy) program. Don’t forget, FSA will administer DMC and the Risk Management Agency administers LGM-dairy, but USDA says the agencies are in coordination and producers should have no challenges participating in both programs.

Did I miss the sign-up window for DMC? No. Technically farmers can legally obtain coverage under the program beginning January 1, 2019. However, the government shutdown prevented farmers from enrolling as FSA offices were closed. The best thing you can do is contact your FSA representative and ask them when they will be ready to take sign ups.

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