Producers Encouraged to Enroll in DMC

Dairy farmers have until December to enroll for the Dairy Margin Coverage Program (DMC). The National Milk Producers Federation is urging all dairy farmers to sign up for the maximum level of protection under the risk management program. NMPF spokesperson Chris Galen says unexpected market fluctuations this year, and expected volatility next year, make the program valuable for dairy farmers.

“This has certainly been a year where dairy farmers could use all the risk management tools that they can have, and the primary one remains the Dairy Margin Coverage Program. The program paid out to farmer who enrolled in it this year, particularly in the spring months when milk prices really cratered, and the DMC helped make certain situations better because of the assistance that it was offering. And as we are looking towards 2021, right now the USDA’s own decision tool shows that margins could be below $9.50 again during the first half of next year. So, this is the primary risk management tool offered by the federal government, and we encourage dairy farmers to make use of it.”

The enrollment period for the program opened Tuesday. Unlike difficult-to-predict federal disaster assistance that’s provided via specific legislation or administrative action, Galen says DMC coverage offers certainty in times of need, allowing for better financial planning and faster payment when necessary.

“One the challenges we have in agriculture is predicting the future, whether it’s what rainfall is going to be next year, or the price of corn, or the price of milk. And so, as we began this year it looked like it was going to be a pretty decent year price wise and the dairy Margin Coverage Program wouldn’t be needed. Well, low and behold, you have the coronavirus pandemic, and it took, not just the DMC but also the Coronavirus Food Assistance Program to help make farmers whole, and even then of course there’s a big question as to how well those programs could backfill all the money that was lost from the marketplace. But the bottom line is we can’t count on CFAP payments being available in the future. So, we certainly need to make certain that the existing program that we do have for dairy farmers, the Dairy Margin Coverage Program, is being utilized to the fullest extent.”

Like many insurance programs, the Dairy Margin Coverage Program allows farmers to insure production on a sliding scale.

“The basic catastrophic level of $4 a hundredweight is free, and then you can go up by 50 cents a hundredweight up to $9.50 and you pay slightly higher premiums as those numbers get larger. We certainly recommend looking at the highest $9.50 coverage level for your first five million pounds of production, because the total cost of that is just 15 cents a hundredweight. And again, the program certainly paid back that value this year, as well as last year. Now, if you have more than five million pounds to insure, there’s a second tier of premiums. Premiums are still fairly affordable, in the $4 to $6 level and then they get much more expensive once you get above $6 hundredweight. So, that is an issue for larger farmers where are they may want to look at other risk management tools as well, like the Livestock Gross Margin Program or the Dairy Revenue Protection Program.”

Galen also encourages dairy farmers to sign up for the second round of payments provided by the Coronavirus Food Assistance Program.

“The enrollment deadline for the dairy margin Coverage Program is December 11, and that coincidentally is also the enrollment deadline for the Coronavirus Food Assistance Program and its second round of payments. You have to sign up for the second round even if you took advantage of the first round. But the bottom line is we don’t know what’s going to happen, if there’s going to be any other emergency assistance related to the coronavirus pandemic for farmers in the future. What we do know is Dairy Margin Coverage Program will exist in 2021, and it’s going to be the primary safety net that farmers should enroll in for next year.”

NMPF has a resource page on its website, www.nmpf.org, with more information for producers about the Dairy Margin Coverage Program.