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Last call: 2019 DMC enrollment deadline is Friday

Progressive Dairy Editor Dave Natzke Published on 16 September 2019

Dairy farmers who procrastinated in signing up for the Dairy Margin Coverage (DMC) program for 2019 have until Friday, Sept. 20 to enroll.

As of Sept. 16, 20,647 dairy operations had signed up for the DMC program. That number represents about 77% of the 26,832 dairy operations with established milk production history and about 80% of the milk production history.

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Of the total enrolled, more than 20,500 dairy operations selected the 95% milk coverage level and the $9.50 per hundredweight (cwt) margin coverage on the Tier 1 (5 million pounds or less of annual milk production history). About one-half of all those enrolled signed up for the full five-year length of the DMC program, making them eligible for the 25% annual premium discount.

Producers who get to their local USDA Farm Service Agency (FSA) office by that date may enroll for one year (2019) or for the full five-year length (2019-23) of the program at the reduced premium rate. Producers are allowed to pay their premiums annually even if they elect the five-year discount.

Friday is also the deadline to request a refund of Margin Protection Program for Dairy (MPP-Dairy) premiums. Dairies that purchased additional coverage over $4 per cwt during MPP-Dairy can choose between a 50% cash refund or a 75% refund of net MPP-Dairy premiums to be used for future DMC premiums.

Enrollment encouraged

“We’re encouraging producers to come in and not wait to the last minute,” FSA Administrator Richard Fordyce told Progressive Dairy on Sept. 16. “There were significant improvements made under the 2018 Farm Bill to make this program more responsive to the markets and the difference in the all-milk price and actual feed costs. The program is truly working. Producers should take [DMC] into consideration and include it in their toolbox to mitigate risk.”

DMC provides coverage retroactive to Jan. 1, 2019, with applicable payments distributed to eligible dairy farmers after they enroll. All those selecting coverage at the Tier 1/$9.50 per cwt level are ensured coverage for the first seven months of the year.

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“We want to make certain producers don’t leave money on the table,” FSA Fordyce said. “We’ve run some numbers, and a dairy operation producing roughly 3 million pounds of milk [per year] and taking advantage of the seven months of indemnity payments [at the $9.50 per cwt and 95% coverage level] so far in 2019 would have received more than $15,000 and would have only had to pay about $4,200 in premiums.”

Total DMC 2019 indemnity payments for those enrolled as of Sept. 16 were estimated at about $276.8 million. Of that total, more than $226 million had already been dispersed.

The August margin and indemnity payment will be announced Sept. 27. Current milk and feed price projections indicate there will not be an indemnity payment at any level for August.

The head of the National Milk Producers Federation (NMPF) also urged all dairy farmers to enroll by Sept. 20.

“DMC sign-up, especially at the maximum $9.50 coverage level, is a no-brainer for dairy producers,” said Jim Mulhern, NMPF president and CEO. “But to take advantage of this program, delay is no longer possible. Farmers need to sign up now.”

Mulhern said DMC is a much more robust safety net for dairy producers of all sizes than the MPP-Dairy, which has been discontinued. Improvements include more affordable premiums and an improved feed-cost formula that factors in the cost of dairy-quality hay values to more accurately reflect the true cost of feeding dairy cows.

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Intergenerational transfers

After enrolling in the program for 2019, participating dairy operations who had an intergenerational transfer between 2014 and 2019 can take advantage of a one-time opportunity to increase their established production history during the 2019 and 2020 annual coverage election periods. Retroactive payments based on the increased production history will apply for 2019 and not prior years. Deadline for registration is Dec. 6, 2019.

A dairy operation may add to their approved production history for an intergenerational transfer when a spouse, child or grandchild join a participating dairy operation. Non-lineal relatives, such as siblings, cousins, nieces or nephews, that join the operation will not be eligible for a production history increase.

The increase to the established production history of the participating dairy operation will be determined based on multiplying both the national rolling herd average data for the current year in effect at the time of the intergenerational transfer and the quantity of cows purchased by the joining family member within 60 days of joining the dairy operation. For an intergenerational transfer to be recognized by FSA, the requesting dairy operation will meet all eligibility requirements including an ownership provision for those entering the business.

Applications for an intergenerational transfer must be approved by the local FSA county committee.

Finally, the deadline to enroll in DMC for 2020 is Oct. 7-Dec. 13, 2019. Producers who locked in coverage in the 2019 sign-up must certify the operation is producing and commercially marketing milk and pay the annual administrative fee during the 2020 enrollment period. Unlike 2019 enrollment, dairy farmers signing up for 2020 won’t have knowledge of margins or estimated indemnity payments in advance.

Information resources

FSA has launched a new website, enabling data searches of DMC enrollment, total payments and average payments by state.

To assist producers in making coverage elections, the USDA partnered with the University of Wisconsin – Madison to develop a DMC decision support tool, which can be used to evaluate various scenarios using different coverage levels through DMC.

NMPF has a resource page on its new website with more information about the program and a four-page brochure summarizing key facts about the DMC.  end mark

Dave Natzke
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