Dairy farmers now have the chance to sign up for the Dairy Margin Coverage Program. Chris Galen, senior vice president of member services and governance with the National Milk Producers Federation, says DMC is a big improvement over past dairy support programs.
“We decided about ten years ago to work with Congress to come up with something better: something that isn’t just tied to the price of milk, that doesn’t involve the USDA coming into the market that way as a buyer of last resort, and coming up with a system that is modeled somewhat after crop insurance, where it’s a type of economic insurance. You know going in kind of what a good milk price is and what a good margin is. This program allows you then to buy different levels of coverage, from low to high. You have to pay more for higher coverage, obviously, but it’s just like any other form of insurance. It allows you to cover your bottom line against bad conditions either caused by low milk prices or by high feed costs.”
He says margins for dairy farmers are better than they were six to nine months ago, but don’t let that keep you from signing up.
“Margins were so poor throughout much of 2023 that, even right now, things are just kind of mediocre. At the end of last year – we just got the numbers for the month of December – if you signed up at the highest coverage level, which is $9.50 per hundredweight, you would have gotten a payment for December if you were covered for 2023. Margins, in that case, were not terrible, but certainly not great. The forecast is for better conditions, not great conditions, but certainly improved conditions in 2024. But we have to see if that’s going to be the case. So that’s why we encourage people to look at the dairy margin coverage program if they’re not already covered or to make adjustments in their coverage levels because you don’t know what’s going to happen with either milk prices or feed costs.”
The only cost is a $100 non-refundable administrative fee, although the premiums rise for higher levels of coverage. Other than that, the program is open to any dairy operation in the U.S.
“It’s open to anyone who commercially sells milk. A lot of farms have already locked in their coverage for this year because of a multi-year lock-in contract that they could have enrolled in a few years ago. Now, that contract was supposed to end last year with the expiration of the Farm Bill, but because Congress kicked the can down the road into 2024 and extended the Farm Bill, that also means that those enrolled in the multi-year contracts are eligible for their continued discounted rates this year. So basically, everything that was supposed to end at the end of 2023, when we were supposed to get a new farm bill, that’s just been moved down the road to this fall.”
The DMC is designed to protect producers from the worst-case scenario. Producers who signed up in 2023 were glad to have the insurance.
“2023 was a year where we saw a lot of worst-case scenario margins. They were quite poor, so the program paid out more than $1 billion last year. I think that’s an important point to raise here. Last year, because margins were so poor, USDA says that the DMC paid out $1.2 billion. So that’s a significant type of safety net to have in place at a time when conditions were bad not only because of low milk prices but also because of the high feed costs.”
Producers can get signed up or make changes to existing coverage until April 29 at their local Farm Service Agency Office.