Many dairy producers saw a positive outlook for 2020 and decided to opt out of the Dairy Margin Coverage (DMC) program for covering their margin losses. Now, many have experienced significant losses over the last several months.
As of June 15, the Farm Service Agency (FSA) said it has issued more than $100 million in much-needed program benefits to dairy producers who purchased DMC coverage for 2020.
The April 2020 income over feed cost margin was $6.03/cwt., triggering the second payment of 2020 for dairy producers who purchased the appropriate level of coverage under the DMC program. The April margin reflects a drop of more than $3 from the March income over feed cost margin of $9.15/cwt.
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. Still, a large portion of dairy operators decided not to enroll due to the more positive outlook for 2020.
Beth Hodge, co-owner of Echo Farms in Hinsdale, N.H., was one of 21 farms that made the decision to purchase DMC coverage from among her state's 94 total dairy farms. She said the April payment from DMC was modest, but the May payment was significant and made a “huge difference” on her 70-cow farm.
While Midwest farmers are familiar with crop insurance, those in the Northeast generally have less experience with this type of risk management option. “I think we are feeling a lot more confident about the decision to do some risk management,” Hodge added.
FSA announced that the DMC safety net signup for 2021 coverage will begin Oct. 12 and will run through Dec. 11, 2020.
“If we’ve learned anything in the past six months, it’s to expect the unexpected,” FSA administrator Richard Fordyce said. “Nobody would have imagined the significant impact that current, unforeseen circumstances have had on an already fragile dairy market. It’s during unprecedented times like these that the importance of offering agricultural producers support through the delivery of farm bill safety net programs such as DMC becomes indisputably apparent.”