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Dairymen choose protection against fluctuating margins

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The U.S. Department of Agriculture – Farm Service Agency opened registration for the Dairy Margin Coverage (DMC) program on June 17, 2019. Seventeen-thousand dairy operations have since enrolled for the new safety net program, exceeding previous signups.

The Dairy Margin Coverage program, based off the Margin Protection Program (MPP), seeks to provide insurance when dairy margins decline. Under Secretary for Farm Production and Conservation Bill Northey says the program saw meaningful improvements, under the 2018 Farm Bill.

“It’s based off the Margin Protection Program, which saw a lot of use last year. Congress made significant improvements to it in the 2018 Farm Bill by reducing the premium cost and increasing the amount of coverage a producer’s able to sign-up for,” Under Secretary Northey said.

The program resembles an insurance product, ensuring protection against narrow margins – feed costs versus the value of milk products produced. Under Secretary Northey speaks to margin coverage, which benefits more than 60-percent of dairies with established production histories.

“It’s figured monthly, so you may have months were the margin is narrower than your coverage level,” Under Secretary Northey said. “The vast majority of producers, so far, have signed up at the $9.50 coverage level. It’s quite inexpensive to do, and obviously offers more coverage than a lower coverage level. We’ve had one out of the last six months that has not paid. All the rest have paid some amount, varying each month.”

Enrolling in this program makes “good economic sense,” according to Northey.

“The dairy industry is in a challenging situation, (as) margins have been tight. I think this program makes a lot of sense in normal circumstances as well,” Under Secretary Northey said. “It’s very inexpensive to buy coverage at a good level. It’s like crop insurance – You don’t buy crop insurance in hopes of getting a payment, you buy it because you want to make sure that if things don’t go right, you’ll get coverage and be able to continue to operate.”

Enrollment for the Dairy Margin Coverage program closes next month, on September 20. Producers interested in receiving such coverage should contact their local Farm Service Agency.