FSA accepting applications for Dairy Margin Coverage
Signup is open for the new Dairy Margin Coverage (DMC) program, the cornerstone program of the dairy safety net that helps dairy producers manage the volatility of milk and feed prices, operated by the USDA’s Farm Service Agency (FSA).
The 2018 farm bill allowed USDA to construct the new DMC, which replaces the Margin Protection Program for Dairy (MPP-Dairy). This new program offers protection to dairy producers when the difference between the all-milk price and the average feed cost (the margin) falls below a certain dollar amount selected by the producer.
The program provides coverage retroactive to Jan. 1, with applicable payments following soon after enrollment. Dairy producers can choose between the $4.00 to $9.50 coverage levels.
The farm bill also allows producers who participated in MPP-Dairy from 2014-2017 to receive a repayment or credit for part of the premiums paid into the program. FSA has been providing premium reimbursements to producers since last month and those who elect the 75% credit option will have that credit applied toward 2019 DMC premiums.
The USDA has built in a 50% blend of premium and supreme alfalfa hay prices with the alfalfa hay price used under the prior dairy program to provide a total feed cost that more closely aligns with hay rations used by many producers. At a milk margin minus feed cost of $9.50 or less, payments are possible. With the 50% hay blend, FSA’s revised April 2019 income over feed cost margin is $8.82 per hundredweight (cwt). The revised margins for January, February and March are, respectively, $7.71, $7.91 and $8.66 – triggering DMC payments for each month.
DMC payments will be reduced by 6.2% in 2019 because of a sequester order required by Congress and issued in accordance with the Balanced Budget and Emergency Deficit Control Act of 1985.
DMC offers catastrophic coverage at no cost to the producer, other than an annual $100 administrative fee. Producers can opt for greater coverage levels for a premium in addition to the administrative fee. Operations owned by limited resource, beginning, socially disadvantaged or veteran farmers and ranchers may be eligible for a waiver on administrative fees. Producers have the choice to lock in coverage levels until 2023 and receive a 25% discount on their DMC premiums.
To assist producers in making coverage elections, USDA partnered with the University of Wisconsin to develop a DMC decision support tool, which can be used to evaluate various scenarios using different coverage levels through DMC. To access the decision tool, visit https://gfb.ag/DMPcalculator.
To locate your nearest FSA office, visit https://www.farmers.gov/service-locator.