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Dairy Margin Coverage Program

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Thursday, August 15, 2019 - 7:45am
Announcer: Farm and Family is a production of the Mississippi State University Extension Service.
 
Amy Myers: Today we're talking about the dairy margin coverage program. Hello, I'm Amy Myers and welcome to Farm and Family. Today we're speaking with Dr. Amanda Stone, Mississippi State University extension dairy specialist. Amanda, I understand the 2018 farm bill authorized the new dairy margin coverage or DMC program. How can this program help dairy producers?
 
Amanda Stone: Amy, The dairy margin coverage program voluntary risk management program is for dairy producers. It's meant to replace the margin protection program for dairy, or NPP as most people refer to it as. The program provides catastrophic coverage and no cost to the producer other than the administrative fee that's about a hundred dollars. It also has various levels of buy up coverage, which producers get to choose the amount in which they participate. DMC continues to offer protection to dairy producers when the difference between the all milk price and the average feed price, or the margin, falls below a certain dollar amount.
 
Amy Myers: Could you explain a little about how the program works?
 
Amanda Stone: Producers select a coverage ranging from $4 to $9.50 per hundred weight, and then they select a coverage percentage of the dairy operations' production history ranging from 5% to 95%. Producers have the choice to lock in coverage levels until 2023 and they can receive a 25% discount on their DMC premiums.
 
Dairy producers who paid NPP dairy premiums during any calendar year between 2014 through 2017 may also be eligible to receive a repayment for part of the premiums that they paid into the program, and through September 20th of 2019 an operation can either select to receive 50% of the repayment amount as cash, like a refund, or take 75% of the amount as a credit that can be used toward premiums for DMC.
 
Amy Myers: You mentioned that DMC offers protection for the difference between the all milk price and the average feed price. Could you explain that a bit further?
 
Amanda Stone: It's really confusing, so we'll try to go through an example that maybe will help us understand it a little bit better. So if we look at January of 2019, corn on average was 356 per bushel. Blended alfalfa was $201 per ton. Soybean meal was $314.92 per ton, and the all milk price was just $16.60 cents. The final feed costs for the DMC using their calculations would be $8.89 cents per hundred weight of milk produced.
 
So that milk margin above feed costs that they're using to calculate the amount that producers could qualify for is $7.71 per hundred weight. So that means that producers are eligible at that point if that is the number that they elected to use their eligible for repayments on that amount. And again, producers can select that. But in general, anything $9.50 cents or less in that last category that we talked about, the 7.71 is less than 9.50, they are eligible for coverage.
 
Amy Myers: So who is eligible for the DMC program?
 
Amanda Stone: Dairy operation has to produce and commercially market milk from cows located in the US and provide proof of milk production at the time of registration. Dairy producers who are members of a dairy operation must share in the risk of producing milk and make contributions to the dairy operation that are at least commiserate with their share of the proceeds of the operation. And dairy operations must be in compliance with the highly erodible land and wetland conservation provisions. Basically, if you were eligible for NPP in the past, you're likely eligible for this program.
 
Amy Myers: If a dairy producer applies and is accepted into the dairy margin coverage program, what should he or she know about receiving payments?
 
Amanda Stone: FSA began issuing payments to producers on July 11th. Weekly DMC program enrollment production and payment updates will be posted on the website every Monday at 2:00 PM Eastern, or 1:00 PM our time. However, there's not a lot of information on payments as of yet because this is such a new program.
 
Amy Myers: Where can we go for more information or to apply for the dairy margin coverage program?
 
Amanda Stone: Find more information by entering dairy margin coverage program into your Internet search engine or go to W-W-W dot F-S-A dot U-S-D-A dot G-O-V, and of course you can contact your Mississippi State University county agent or state specialist to help guide you.
 
Amy Myers: You can also go to usda.gov to search for our local representative. Today we've been speaking with Dr. Amanda Stone, dairy specialist. I'm Amy Myers and this has been Farm and Family. Have a great day.
 
Announcer: Farm and family is a production of the Mississippi State University Extension Service.
Department: Animal & Dairy Science

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