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October DMC Margins Above Trigger; Declines Expected in 2021

December 1, 2020

The monthly margin for October under the Dairy Margin Coverage (DMC) program increased by $1.93 per cwt from September’s margin, to $11.13 per cwt, meaning no payments to farmers for milk produced that month. Still, forecast margin declines made a compelling case for signup for the program in 2021, due by Dec. 11.

Both the milk-price and the feed-cost components of the margin formula increased in October; the milk price increase during the month, $2.30 per cwt, far outpaced the $0.57 per cwt higher feed cost. For the second month in a row, both the corn and soybean meal prices were higher by appreciable amounts in October.

As the DMC 2021 deadline approaches, futures markets continue to indicate that margins will drop below $9.50 per cwt early next year and remain well below that level through at least next summer. As this year proved, making the decision to sign up for the program based on the market outlook near the end of the enrollment period can be very misleading, and that signing up should be the default decision in any case. But for next year, the outlook further reinforces that indication, erasing any residual uncertainty about participating next year at $9.50 per cwt for the first five million pounds of production history.

The DMC information page on NMPF’s website offers a variety of educational resources to help farmers make better use of the program. NMPF also is offering dairy farmers, cooperative members and state dairy associations a free webinar at 1:30 p.m. ET on Wednesday, Dec. 2, to help them develop effective risk management plans. Participants will be able to ask questions about the year ahead and learn more about how farmers can manage their risk through expected turbulence.