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Dairy group seeks USDA extension for DMC signups

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SEEKING MORE TIME: With the pandemic and other issues, singup for the Dairy Margin Coverage program lags. NMPF seeks more time.
USDA asked to extend deadline for another month to encourage additional sign ups for Dairy Margin Coverage.

The National Milk Producers Federation urged USDA to extend signup for the 2021 Dairy Margin Coverage Program to Jan. 30, 2021, allowing dairy farmers to make better-informed choices while giving both milk producers and USDA staff strained by coronavirus-related challenges additional time to communicate. The current signup deadline of Friday, Dec. 11 remains in place while USDA considers NMPF’s request.

“Extending the DMC deadline to the end of next month will allow farmers to better focus on the turbulent marketing environment we now expect to see in 2021, once we are through the upcoming holiday season,” says Jim Mulhern, president and CEO of NMPF, in the letter. “An extension would allow more time for interaction between USDA staff and farmers – both of whom are working through the challenges of this very difficult year.”

Related: DMC enrollment lags behind 2019

Unfortunately, based on USDA’s most recent data, the DMC sign-up for next year is currently well below the participation levels of both 2019 and 2020, the letter noted. Last year, approximately 13,000 farmers enrolled in DMC for 2020; this represents just over 51% of the operations with established DMC production histories.

“But as we approach the close of this year’s enrollment window, just 7,846 dairy operations are enrolled for 2021, representing less than one-third of the dairies with production histories,” NMPF notes.

USDA last week announced a similar one-month deadline extension to assist fisherman applying for its seafood trade relief program.

The DMC, the main federal risk-protection tool for dairy farmers, is projected to provide support to producers enrolled at the maximum $9.50/cwt. coverage level through at least the first half of 2021, as volatile market conditions are expected to persist well into next year.

Related: Dairy Margin Coverage: 'Cornerstone of risk management strategy'

In a recent Farm Bureau market intel report, economist Michael Nepveux says the low enrollment is somewhat surprising given the expected benefits of enrolling in 2021. “While a rally in crop markets may be a boon for those farmers, it results in increased feed costs for dairy producers. Increased feed costs squeeze dairy farmers’ margins, making participation in programs like DMC more attractive,” Nepveux says.

“As of now, all of 2021 is expected to see a trigger price above $19/cwt, resulting in a relatively decent chance of payments at this coverage level. Current Class III and Class IV milk futures, and milk price forecasts indicate the all milk price used to calculate margins will likely remain under the trigger price throughout the year, resulting in payments. It would make sense for producers to at least enroll their first 5 million pounds under Tier I at a $9.50 coverage level given the expected net benefit,” Nepveux adds.

NMPF is urging dairy farmers to sign up for the program, given the high likelihood that payments will far exceed premiums next year. “A deadline extension will allow us to continue driving home the point that farmers must utilize DMC next year, particularly in light of the critical safety net support it provided during these last two years,” the letter from Mulhern says.

NMPF adds it has produced an easy-to-digest brochure highlighting the benefits of DMC coverage and an explanation of how the program works. Dairy producers can also visit NMPF’s page on risk management to learn more about DMC and other tools to promote financial security for dairy operations.

TAGS: Policy Dairy
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