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Dairy margin program pays out for May losses

May DMC falls to lowest margin since 2013, although historic rebound expected.

The Dairy Margin Coverage (DMC) program margin for May was $5.37/cwt., the lowest since July 2013 and 65 cents/cwt. lower than the margin for April. Still, projections show that June’s margin may see the highest jump since 2000, with a strong recovery in prices that should buoy margins through the rest of the year.

The U.S. Department of Agriculture’s Farm Service Agency (FSA) announced that the May 2020 income over feed cost margin was $5.37/cwt., triggering the third payment of 2020 for dairy producers who purchased the appropriate level of coverage under the DMC program.

“This payment comes at a critical time for many dairy producers,” FSA administrator Richard Fordyce said. “DMC has proved to be a worthwhile risk management tool, providing dairy producers with much-needed financial support when markets are most volatile.”

The April to May drop in the DMC margin was due to an 80 cents/cwt. lower all-milk price, offset by a 15 cents/cwt. lower calculated feed cost, the National Milk Producers Federation (NMPF) reported. The May margin will generate a payment of $4.13/cwt. for that month for producers enrolled in the program this year at the $9.50/cwt. margin coverage level and smaller payments for producers enrolled all the way down to $5.50/cwt.

The current USDA forecast for the June margin is $10.86/cwt., $5.49/cwt. higher than the May margin and by far the largest one-month increase in the DMC (or predecessor Margin Protection Program) margin since at least January 2000, the earliest margin data available, NMPF added.

The USDA/FSA Decision Tool’s current forecast for the remainder of the year indicates that the margin will peak in July at almost $13/cwt. and then drop back toward $9.50/cwt. during the remainder of the year.

To date, FSA has issued more than $176 million in program benefits to dairy producers who purchased DMC coverage for 2020.

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. More than 13,000 operations enrolled in the program for the 2020 calendar year.

Although DMC enrollment for 2020 coverage has closed, signup for 2021 coverage will begin Oct. 13 and will run through Dec. 11, 2020.

The DMC information page on NMPF’s website offers a variety of educational resources to help farmers make better use of the program.

DMC monthly margins June 2020.jpg

TAGS: Dairy
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