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USDA issues $100m in dairy support payments

Dairy farmers begin receiving checks under new Dairy Margin Coverage program.

The U.S. Department of Agriculture’s Farm Service Agency (FSA) opened enrollment for the Dairy Margin Coverage (DMC) program on June 17 and has started issuing approximately $100 million in payments to producers who purchased coverage.

FSA administrator Richard Fordyce said more than 10,000 dairy operations currently are signed up for the program. This represents more than one-fourth of all U.S. dairy farms that have signed up for DMC since enrollment began on June 17, according to USDA. Enrollment will continue through Sept. 20, and coverage is retroactive to Jan. 1.

Authorized by the 2018 farm bill, DMC replaces the Margin Protection Program for Dairy (MPP-Dairy). The program offers protection to dairy producers when the difference between the all-milk price and the average feed cost (the margin) falls below a certain dollar amount selected by the producer.

“Times have been especially tough for dairy farmers, and while we hope producers’ margins will increase, the Dairy Margin Coverage program is providing support at a critical time for many in the industry,” said Bill Northey, USDA undersecretary for farm production and conservation. “With lower premiums and higher levels of assistance than previous programs, DMC is already proving to be a good option for a lot of dairy producers across the country. USDA is committed to efficiently implementing the safety net programs in the 2018 farm bill and helping producers deal with the challenges of the ever-changing farm economy.”

Aid welcomed

The National Milk Producers Federation (NMPF) thanked USDA for meeting the timeline Agriculture Secretary Sonny Perdue promised in February for dairy program payments under the 2018 farm bill. Dairy farmers began receiving checks under the new DMC program this week, in keeping with USDA’s pledge.

“DMC aid represents significant improvement from previous programs, and with dairy farmers facing a fifth year of low prices, receiving better assistance in a timely fashion is a matter of survival for some family farms,” NMPF president and chief executive officer Jim Mulhern said.  “The DMC program doesn’t replace a healthy market, but it is a crucial safety net in turbulent times. All dairy producers should strongly consider enrolling and to look closely at coverage at the $9.50 maximum level.”

Mulhern, in a "CEO Corner" article, noted that the new DMC program, along with other pro-dairy policies in the law, "clearly outdoes previous initiatives, and we’re excited it’s finally becoming reality."

"The DMC – now with its enhanced feed cost calculation – is a tangible benefit for NMPF members as well as all the nation’s dairy farmers who sign up for the program. It came from the industry unity that was forged as we moved ahead on the farm bill, and it came from maintaining the discipline to focus on a realistic, achievable, dollar-and-cents return. It’s important to thank the many people who contributed to this effort: NMPF member cooperatives, numerous state dairy associations, [the International Dairy Foods Assn.], the lawmakers who drafted the farm bill, the Administration officials who are implementing it and the hard-working staff here who helped guide all of this into reality and many more," Mulhern noted.

May margin payment

DMC provides coverage retroactive to Jan. 1, 2019, with applicable payments following soon after enrollment.

The May 2019 income over feed cost margin was $9.00/cwt., triggering the fifth payment for eligible dairy producers who purchase the $9.50 level of coverage under DMC. Payments for January, February, March and April also were triggered.

With the 50% hay blend, FSA’s revised April 2019 income over feed cost margin is $8.82/cwt. The revised margins for January, February and March are, respectively, $7.71, $7.91 and $8.66.

Dairy producers can choose coverage levels from $4 up to $9.50 at the time of signup. More than 98% of the producers currently enrolled have elected $9.50/cwt. coverage on up to 95% of their production history.

Early this month, Mulhern noted that USDA reported the May margin under the DMC program at $9.00/cwt. That reported margin is 12 cents lower than it would have been otherwise, meaning payments for farmers who enroll at the maximum $9.50 coverage level allowed under the program will be 12 cents higher because of the calculation change.

"For the first five months of 2019, hay values have averaged 21 cents/cwt. higher under the new formula. Again, participating dairy farmers will, as a result of this change, receive a greater payment -- one many will need desperately in what is now our fifth year of low prices," Mulhern noted.

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