The Value of a Safety Net: $981 Million in DMC Payments Distributed Thus Far
October 26, 2021
One thing dairy farmers learned in 2020 was the value of safety net programs. The Dairy Margin Coverage (DMC) program, authorized 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.
Last year, only 50% of producers enrolled in DMC. During the first quarter of 2020, many dairy producers were caught off guard when the black swan event of COVID-19 pulled a rug out from under the dairy markets. After the rollercoaster year, more dairy producers chose to participate in DMC in 2021, with more than 19,000 (75%) producers enrolling.
Surging feed prices have hit dairy farmers hard throughout 2021, especially as drought-stricken areas have continued to worsen. In August, the USDA announced it had made improvements to the DMC safety net program by updating the feed cost formula to better reflect the actual cost dairy farmers pay for high quality alfalfa. The change will be retroactive to January 2020 and is estimated to provide about $100 million in additional payments for the past two years.
As feed prices continue to climb, payments have hit producers mailboxes throughout the year. So far, more than $981 million in DMC payments have been distributed and dairy operations have received $51,566 on average. The top five states receiving payments include:
To see your state’s payments, check out the Dairy Margin Coverage Program Information, here.