The U.S. Department of Agriculture’s Farm Service Agency (FSA) announced this week that the March 2020 income over feed cost margin was $9.15/cwt., triggering the first payment of 2020 for dairy producers who purchased the appropriate level of coverage under the Dairy Margin Coverage (DMC) program.
“This payment comes at a critical time for many dairy producers,” FSA administrator Richard Fordyce said. “It is the first triggered DMC payment for 2020 and the first payment to dairy producers in seven months.”
Current projections indicate that a DMC payment is likely to be triggered every month for the remainder of 2020 -- a different expectation from last July, when some market models had projected no program payments for 18 months.
Authorized by the 2018 farm bill, DMC is a voluntary risk management program that offers protection to dairy producers when the difference between the all-milk price and the average feed price (the margin) falls below a certain dollar amount selected by the producer.
Earlier this spring, after the COVID-19 outbreak spread to the U.S., dairy groups requested that USDA allow producers to sign up retroactively for 2020 coverage. In announcing the Coronavirus Food Assistance Program (CFAP) on April 18, Agriculture Secretary Sonny Perdue defended his decision not to reopen the DMC program to allow for producers to enroll if they previously had not done so at the beginning of the year.
He said DMC is designed to act as an insurance program and should not be reopened for producers to retroactively receive coverage for 2020. “We begged people to sign up last year,” he said, adding that allowing retroactive enrollment would train people to not take the insurance as they should and instead call for ad hoc assistance.
More than 13,000 operations enrolled in the program for the 2020 calendar year; however, a potential of 40,000 operations could have signed up.
Although DMC enrollment for 2020 coverage has closed, dairy producers should look for FSA to open the signup period for 2021 coverage in July, FSA said.