USDA’s Farm Service Agency this year issued four Dairy Margin Coverage payments, as dairy producers were pressed by the coronavirus pandemic. The current USDA forecast indicates margins will drop below $9.50/cwt in the first half of 2021, making it another challenging year for the dairy industry.
United States dairy producers have until Friday, December 11 to apply for the 2021 Dairy Margin Coverage (DMC) program. The program, authorized under the 2018 Farm Bill, “protects dairy producers when the difference between the all milk price and average feed price (the margin) falls below a certain dollar amount selected by the producer.”
Marin Bozic, University of Minnesota assistant professor, says, “Dairy Margin Coverage is an effective program that’s going to make a big difference in 2021.”
“We are currently looking at forecasted payments exceeding 80-cents per hundredweight, with payments expected to occur in all months other than December. Keep in mind this is at the current futures prices,” Bozic says.
Bozic views the Dairy Margin Coverage program as a way for producers to “brace themselves for the next year and the downside risks on the horizon.”
“Anybody can signup for Dairy Margin Coverage,” Bozic says. “It’s a two-tiered program. The first tier – the first five million pounds – is particularly favorable to dairy producers. For every dollar paid in premium over the last 10 years, producers would have collected nine dollars in gross payments before premiums.”
Bozic adds, “There are few programs as effective as Dairy Margin Coverage in providing coverage.” Producers are finding value in the program as well. FSA Administrator Richard Fordyce says as of Monday, November 30, 780,046 dairy operations had enrolled, with Iowa enrolling 369 dairies.
