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USDA reports strong early interest in Dairy Margin Coverage program

Progressive Dairy Editor Dave Natzke Published on 27 June 2019

Despite challenges with late spring planting and hay harvest, dairy producers are signing up for the Dairy Margin Coverage (DMC) program in high numbers, according to Bill Northey, USDA undersecretary for farm production and conservation. DMC enrollment began at local USDA Farm Service Agency offices on June 17.

Providing a DMC program update in a media conference call on June 27, Northey said about 5,364 dairy farmers had certified milk production levels in the first 10 days of the sign-up period. Of those, about 2,600 producers had signed up for the full five-year length of the program, with the remainder initially electing to participate just in 2019. Those signing up for the full five-year program are eligible for 25% premium discounts.

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Although specific state and herd size estimates weren’t available, Northey said early DMC enrollment was heaviest in states with the highest herd numbers, including New York, Pennsylvania, Minnesota, Michigan and Wisconsin. He said interest was also strong in California.

Vast majority selecting top coverage

Of those enrolling in Tier 1 (maximum 5 million pounds of milk per year), 98% had selected the top coverage level of $9.50 per hundredweight (cwt), Northey said.

About 1,000 producers had also signed up for Tier 2 coverage (on milk production in excess of 5 million pounds). Of those, about 900 had set margin coverage at the $4 per cwt level, at no additional premium cost. About 100 others selected margin coverage at $5 per cwt, at a premium cost of $0.005 (one-half cent) per cwt.

Kaveh Sadeghzadeh, deputy director, communications, with USDA’s Farm Production and Conservation, said dairy farmers who already enrolled in the program can visit their local offices through the end of the sign-up period (Sept. 20) to see about making changes to their elections.

Northey said the USDA was getting software in place and was still waiting for final word from the Office of Management and Budget (OMB) to begin making DMC payments. He anticipated payments to start in early July.

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Dairy farmers enrolling at the Tier 1/$9.50 per cwt level were ensured substantial payments, retroactive to January. Tier 1 dairy producers selecting the $9.50 per cwt margin would receive gross indemnity payments averaging about $1.23 per cwt for milk produced in January through April. Factors used to calculate May DMC margins were released later (see related article).

DMC payments will be reduced by 6.2% in 2019 because of a sequester order required by Congress. Premiums for 2019 are due in September.

MPP-Dairy premium refunds applied to DMC

Of the 5,364 producers signed up through June 27, about 3,000 had applied premium refunds from the previous Margin Protection Program for Dairy (MPP-Dairy) directly to DMC premiums for 2019 and beyond. Northey estimated those credits at nearly $14 million.

Based on previous estimates, Northey said approximately 1,400 dairy producers had taken MPP-Dairy premium refunds in cash, totaling about $5 million. Total MPP-Dairy premium credits had previously been estimated at about $70 million.

For producers waiting to make DMC decisions – or those who might want to change their initial selection – the USDA partnered with the University of Wisconsin to develop a DMC decision support tool, which can be used to evaluate various coverage levels and premium costs. For additional information, contact your local USDA service center.  end mark

Dave Natzke
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