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DMC’s January Payout Exceeds Annual Premium Costs

March 2, 2021

The margin in January for the Dairy Margin Coverage program, the main federal dairy safety-net initiative, was $7.14 per cwt, down from $8.78 per cwt in December. That generated a payment of $2.36 per cwt for $9.50 per cwt coverage for January – which, by itself, was already more than enough to repay the full cost of signing up for the program at the maximum coverage level for the entire year.

The January all-milk price dropped another dollar from December to $17.50 per cwt. Meanwhile, the remaining $0.64 per cwt monthly drop in the margin was generated almost entirely by increases in corn and soybean meal costs. The one-month increase in the margin’s feed cost was the highest for the DMC as well as for its predecessor, the Margin Protection Program, which was initiated in 2014.

With current futures prices indicating that the all-milk price won’t rise above January’s level for several months and that corn will keep rising and soybean meal will not get much cheaper over the same period, the program is expected to generate substantial payments in 2021.