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DMC feed cost formula adjusted to include 'dairy-quality' hay prices

Progressive Dairyman Editor Dave Natzke Published on 13 June 2019

Late changes in Dairy Margin Coverage (DMC) program calculations make the program even more attractive for dairy farmers. DMC sign-up begins June 17 at local USDA Farm Service Agency (FSA) offices.

In a press release on June 13, U.S. Ag Secretary Sonny Perdue announced a change in feed cost calculations used to determine monthly margins.

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Under the previous Margin Protection Program for Dairy (MPP-Dairy) and as initially announced under DMC, the USDA used monthly average corn, soybean meal and alfalfa hay prices to calculate a national average feed cost.

Under the revised DMC program formula announced June 13, the feed cost will again use monthly average corn and soybean meal prices but will incorporate a 50% blend price for Premium and Supreme “dairy-quality” alfalfa hay more commonly used in dairy cow rations.

Mandated by the 2018 Farm Bill, the USDA’s National Ag Statistic Service (NASS) began reporting monthly average dairy-quality Premium and Supreme alfalfa hay prices in an effort to more accurately calculate dairy farmer feed costs under federal dairy safety net programs. The report lists hay prices in eight states and averages prices from the top five milk-producing states: California, Idaho, New York, Texas and Wisconsin.

With that adjustment, DMC January-April average feed costs were raised an average of 23 cents per hundredweight (cwt), increasing indemnity payments by a like amount. The revised milk income over feed cost margins for January, February, March and April are $7.71, $7.91, $8.66 and $8.82 per cwt, respectively (Table 1).

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With the new calculations, dairy producers selecting the $9.50 per cwt margin on the first 5 million pounds of annual milk production would receive indemnity payments averaging about $1.23 per cwt for milk produced in January through April.

DMC payments will be reduced by 6.2% in 2019 because of a sequester order required by Congress.

The program provides coverage retroactive to Jan. 1, 2019, with applicable payments following soon after enrollment. At the time of sign-up, dairy producers can choose between the $4 to $9.50 coverage levels.

The farm bill also allows producers who participated in MPP-Dairy from 2014-17 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 that elect the 75% credit option will now have that credit applied toward 2019 DMC premiums.

To assist producers in making coverage elections, the 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.

For more information, visit the DMC webpage or contact your local USDA service center.  end mark

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Dave Natzke
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