Taylor Leach
December 24, 2020
Towards the end of 2019, dairy producers had a big decision to make regarding risk management going into 2020. Milk future prices looked promising for the first time in a long time and farmers were starting to see a glimmer of light at the end of a long, dark tunnel. Optimism was finally in the air. But did that optimism cause Dairy Margin Coverage (DMC) enrollment numbers to crash?
In 2019, nearly 84% of U.S. dairy producers were enrolled in DMC, a risk management program that 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. During that year, each operation that was enrolled received an average payment of $13,409.
As 2020 approached, prices appeared to look more encouraging, which lead thousands of producers to believe that they could save a few dollars by opting out of the safety net program. Dropping by 33%, only 51% of U.S. dairy producers enrolled in DMC for 2020. And as we all know, the first quarter of the year pulled a rug out from under the dairy markets, causing some producers to wish that they had stayed enrolled in the risk management program. Throughout the past year, the 13,520 operations who enrolled in DMC received a total of nearly $200 million in payments, averaging out to be approximately $14,791 per operation. Wisconsin producers were at the top of the payment list, with the state receiving $47.6 million. Other top dairy states received:
Minnesota - $26.7 Million total payments, Averaged $13,962 per operation California - $17.7 Million total payments, Averaged $27,032 per operation Pennsylvania - $11.3 Million total payments, Averaged $12,517 per operation New York - $11 Million total payments, Averaged $12,964 per operation When time came to enroll for coverage in 2021, thousands of dairy producers made the decision to sign on for coverage for the new year. Enrollment numbers jumped to 68.2%, amplifying 17% compared to 2020. This means that nearly two-thirds of producers signed up for the risk management program going into 2021.
While milk prices seem to be on the upward slope as of now, 2020 has taught us that you never know when the floor is going to fall out from underneath you. Therefore, it’s always a good idea to have a risk management program in your back pocket just in case you know what hits the fan…again.
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