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Don’t Count on Direct Payments in Place of Dairy Margin Coverage

Anna-Lisa Laca

December 8, 2020

In 2020 milk markets experienced the most volatility they’ve seen in a long time. When COVID-19 hit and prices plummeted, many dairy producers were caught without a risk management plan or even Dairy Margin Coverage program coverage. The Trump Administration stepped in with the Coronavirus Food Assistance Program (CFAP). The rest of the story is history. The Farmers to Families Food Box program sent Class III milk prices on an upward trajectory. Additionally, dairy farmers have received nearly $1.1 Billion in direct payments from CFAP 2.0 alone. However, policy analysts agree direct payments at this level are unlikely to continue under the Biden Administration.

“I can't predict what the next administration is going to do as far as, you know, any kind of support related to the pandemic or maybe other things that may happen,” Richard Fordyce administration of the Farm Service Agency said in a press call last week. “If I were counseling dairy operations, I would say we don't know what's coming next. I wouldn't want to wager on the fact that I don't need to sign up for DMC because there will be other support, because we just don't know at this point and we do know how DMC works and we do know it is an effective risk management tool.”

Marin Bozic, an economist from University of Minnesota, says the bipartisan proposal for COVID stimulus points out the Biden administration is likely to put a higher emphasis on the Supplemental Nutrition Assistance Program than the current administration.

“We also do know that some of the leading candidates for the Secretary of Agriculture in the Biden Harris administration have expressed their lack of approval for some of the current programs, and also their desire to strengthen the Supplemental Nutrition Assistance Program,” he explains. “So, it would not be surprising to me. If most of the money in the new stimulus bill is allocated to the SNAP program and see CFAP discontinued or continue nowhere near the levels that we have experienced in 2020. It would be reckless to bet the farm on continuing the programs that are more likely going away.”

The deadline to enroll is this Friday, December 11, 2020. The National Milk Producers Federation this week asked for an extension to the enrollment period for the DMC program. According to Fordyce last week, an extension is unlikely to be approved.

The DMC program, created by the 2018 Farm Bill, offers market protection to dairy producers when the difference between the all-milk price and the average feed cost falls below a certain dollar amount selected by the producer.

Farmers can select a $4.00 catastrophic level of coverage with no premium fee or they can choose to buy-up coverage where the premium is based on margin triggers between $4.50 and $9.50 on 5 to 95% of established production history. FSA has a margin calculator tool to help determine what level of coverage your operation needs.



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