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Dairy farmers urged to consider federal risk management tools

With rising costs eroding dairy margins despite high farm milk prices, the National Milk Producers Federation (NMPF) is urging farmers to sign up for maximum 2023 coverage under USDA’s Dairy Margin Coverage (DMC) program, an important component of federal dairy risk-management programs supported by NMPF.

USDA recently announced that DMC signup is available beginning Oct. 17, with a deadline of Dec. 9.

“Dairy producers are the backbone of many agricultural communities across rural America,” FSA Administrator Zach Ducheneaux said. “Dairy Margin Coverage provides critical assistance to our nation’s small- and mid-sized dairies, helping make sure they can manage the numerous and often unpredictable uncertainties that adversely impact market prices for milk. This year showed why enrolling in DMC makes good business sense. Early in the year, some economists predicted that DMC would not trigger any payments for the calendar year, but then fast forward to now, when we’re starting to see payments trigger and a return on investment.”

Despite record prices this year, accompanying record costs resulted in DMC payments for August for farmers enrolled at the maximum coverage level. USDA reported that DMC payments to more than 17,000 dairy operations have triggered for August for more than $47.9 million and an indemnity payment is projected for September as well. At $0.15 per hundredweight for $9.50 coverage, risk coverage through DMC is a relatively inexpensive investment, USDA added.

“The current combination of high prices with costs that can be even higher illustrates the basic value of DMC for producers who can benefit from the program,” said Jim Mulhern, president and CEO of NMPF. “By calculating assistance via a margin rather than a target price, DMC offers a measure of protection against the current cost volatility that’s challenging many milk producers.”

Farmers should also consider signing up for federally backed risk-management programs appropriate to their operations, Mulhern said.

DMC is designed to promote stable revenues and protect against financial catastrophe for small and medium-sized producers. It’s part of a suite of federally backed risk-management tools, including the Dairy Revenue Protection (DRP) program and the Livestock Gross Margin for Dairy Producers (LGM-Dairy) program, which were revamped in the 2018 Farm Bill at NMPF’s urging.

DMC resulted from NMPF’s effort to improve inadequate federal margin-protection insurance. LGM-Dairy and DRP were made workable via NMPF’s efforts to remove spending caps and a ban on enrollment in multiple programs, which previously limited their usefulness.

Mulhern also reminded eligible farmers who did not sign up for supplemental DMC coverage in 2022 based on updated production levels that they have another opportunity to do so this year.

NMPF also reminds producers that USDA is developing a separate milk loss program, as provided for in legislation enacted last year. This program will reimburse dairy producers of all sizes for milk dumped on account of disasters that occurred in 2020 and 2021, including, but not limited to, derechos, excessive heat, winter storms including polar vortexes, droughts, hurricanes, and wildfires. NMPF is working with USDA as it develops the initiative.

Krissa Welshans

Oct 18, 2022


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