ARLINGTON, Va. – The National Milk Producers Federation thanked the U.S. Department of Agriculture 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 Dairy Margin Coverage 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,” said Jim Mulhern, president and CEO of the NMPF.  “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.”

More than one-fourth of all U.S. dairy farms – nearly 10,000 — have signed up for DMC since signups began June 17, according to USDA. Enrollment will continue through Sept. 20, and coverage is retroactive to Jan. 1. NMPF has a resources page on DMC and other dairy assistance programs on its website, https://www.nmpf.org/policy_tags/dairy-margin-coverage/.

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 The National Milk Producers Federation (NMPF), based in Arlington, VA, develops and carries out policies that advance dairy producers and the cooperatives they own. NMPF’s member cooperatives produce more than two-thirds of U.S. milk, making NMPF dairy’s voice on Capitol Hill and with government agencies. For more, visit www.nmpf.org.

Getting results for members is central to the mission of any trade organization.

Fortunately, thanks to a great deal of hard work by our expert staff, NMPF has important achievements to point to that will make life better for the folks we serve.

One major accomplishment came to fruition in June, with signup beginning for the Dairy Margin Coverage program. This program will not only tangibly aid farmers struggling with low prices; it will help milk producers even more than we first reported when the farm bill that contained it was signed into law last December.

A quick recap: After the Margin Protection Program, an effort wounded out of the gate because of Congressional budget compromises from 2014, clearly showed it was inadequate for farmer needs, we went to work immediately in an effort to fix it. The effort took more than two years, but it paid off. First, by improving MPP in early 2018 budget legislation, then by replacing it with a better program in the farm bill late last year. The new DMC, along with other pro-dairy policies in the law, clearly outdoes previous initiatives, and we’re excited it’s finally becoming reality.

But even with the new law in place, we knew it wasn’t time for a victory lap — not with farmers still suffering from low prices and with more opportunities to solidify potential improvements to help members through the USDA rulemaking process. That set the stage for another accomplishment, one that finally reached fruition last month.

One farm-bill dairy provision we secured that was little-noted at the time, but that we knew had potential to further help producers, was a new requirement that USDA report the prices of higher-quality alfalfa feed in top dairy-producing states. We sought the provision in the farm bill because we knew the previous program’s feed-cost calculations did not fully reflect the true cost of dairy-quality hay. Obtaining the reporting provision in the farm bill was an opportunity to show more precisely the cost burden this feed was imposing on farmers. Calculations that best reflect industry cost-price fundamentals across the country is the spirit of the program, which is meant to help dairy farmers facing an income squeeze because of those higher feed costs.

We quietly made this case in meetings with USDA through the first half of the year — and it’s one that, thankfully, Secretary Perdue and the staff at USDA heard sympathetically. Less than a week before signups began June 17, USDA announced it would incorporate dairy-quality hay costs into DMC margin calculations.

The impact is immediate. Early this month, USDA reported that the May margin under the DMC program is $9.00 per hundredweight.  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 $0.21 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.

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, IDFA, 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.

According to USDA, more than 5,300 producers enrolled in the DMC in the first 10 days of the sign-up period, with 98 percent of those who signed up for Tier I coverage of the first 5 million pounds selecting $9.50 coverage.  About half of all producers signed up for the full five-year length of the program. With checks going out in July, those who needed assistance immediately are receiving it, and those who are waiting for more information – or perhaps just a pause in their busy schedules – have until September. I strongly encourage all producers to take a good look at the new program and be sure to get into their county Farm Service Agency office to sign up.

Our efforts now are focused on providing resources and expertise to aid with signup, including on our website and through member communications, to make sure that farmers have the information they need to make the right decisions.

Like the dairy farmers we serve, our work is never done. But just as dairy delivers, that’s our goal too. A DMC that’s even better than it would have been is the kind of result we strive to achieve here every day at NMPF. We are proud to serve our members and the entire dairy producer community. Thank you for the hard work you do, which inspires us to do the same.

 

 

USDA’s announcement that it was modifying the feed-cost calculation for the DMC margins to reflect the cost of dairy-quality alfalfa hay has offered additional assistance for producers who sign up for the program.

Under USDA’s formula, the department will use the simple average of the U.S. average price received by farmers for all alfalfa hay and the average price received in the five largest milk-producing states for premium and supreme grade alfalfa hay. That’s a change from the previous Margin Protection Program, which used only the lower U.S. average price for all alfalfa hay. The change will increase the calculated DMC feed costs for the first five months of the year by an average of 21 cents per hundredweight of milk, which reduces the DMC margin by the corresponding amount. This will generate larger payments for program participants whose coverage level is high enough to trigger compensation.

The National Milk Producers Federation has long urged USDA to calculate the margins using the cost of higher quality alfalfa used in dairy feed rations and secured a provision in last year’s farm bill directing the department to collect and report the necessary data. In its announcement, USDA stated that the change would “provide a total feed cost that more closely aligns with hay rations used by many producers.”

The DMC margin for May is $9.00 per cwt, generating a payment for the month of 50 cents per cwt for producers who purchase coverage for 2019 at the DMC maximum level of $9.50 per cwt, for up to 5 million pounds of production history. May’s DMC margin was $0.18 per cwt higher than April’s, resulting from a $0.30 per cwt higher milk price and $0.12 per cwt higher feed cost.

USDA’s DMC Decision Tool, which assists producers in making their program enrollment decisions, has been updated to reflect the recent change to the feed cost calculation. As of June 28^th, the tool, which can be accessed online, was projecting margins that would generate payments that average $0.49 per cwt., net of estimated federal sequestration, for all of 2019 to producers who sign up for $9.50 per cwt coverage on up to 5 million pounds of production history. Coverage at this level costs $0.15 per cwt for the year.

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

Signup for the long-awaited Dairy Margin Coverage program began June 17, including a late change to DMC feed-cost calculations that will bring dairy farmers millions of dollars in additional aid and that NMPF had been quietly advocating with the White House and USDA for months. More than 5,000 dairy farmers signed up for the program in its first 10 days, according to USDA.

The 2018 Farm Bill created the DMC program, which replaces the Margin Protection Program for Dairy. The program protects dairy producers when the difference between the milk prices and feed costs (the margin) falls below a certain dollar level of coverage selected by the producer. The USDA’s decision to include the cost of high-quality alfalfa feed in the payment calculations, announced shortly before signup began, increases calculated feed costs and thus lowers margins, triggering higher payments to producers. The decision will be a boon for dairy farmers facing a fifth year of low prices.

“The DMC provides a stronger safety net for America’s dairy producers, one sorely needed as low prices, trade disturbances and chaotic weather patterns combine to create hardships,” said Jim Mulhern, president and CEO of the NMPF. “We have advocated for months that margin calculations must consider the higher feed costs dairy producers pay to properly nourish their livestock. USDA’s decision to include premium and supreme quality alfalfa feed is appropriate and is another win for dairy farmers that will provide additional, crucial aid.”

Producers may cover up to their first 5 million pounds of milk production history (equivalent to the production of a 215-cow dairy farm) at a margin of up to $9.50 per hundredweight. Payments under the program will be retroactive to January 1. Calculations already made for the first five months of the year show that producers signing up at the $9.50 level would receive payments for each month, with total payments far exceeding the already-set annual premium. All producers will be able to access this affordable coverage regardless of size, and larger producers will have access to significantly more affordable $5.00 catastrophic-type coverage.

As far back as the Farm Bill signing in December 2018, NMPF advocated for USDA to prioritize implementation of the dairy program given the prolonged distress producers have faced.  USDA heeded this call early on and members of Congress gave voice to it as well.  This spring, House Agriculture Committee Chairman Collin Peterson (D-MN) and Rep. Glenn ‘GT’ Thompson (R-PA) as well as Senate Agriculture Committee Ranking Member Debbie Stabenow (D-MI) and Senator Roy Blunt (R-MO) spearheaded bipartisan letters urging USDA to promptly finalize the DMC program in a farmer-friendly manner.

“We very much appreciate USDA Secretary Sonny Perdue sticking with the department’s pledge to make dairy a priority in Farm Bill implementation,” Mulhern said. “And we again want to express our appreciation to Congressional agriculture leaders who worked together on a bi-partisan basis to deliver these program improvements,” he said.

Dairy farmers have begun to receive letters in the mail from USDA’s Farm Service Agency to make them aware of their enrollment and coverage options under the DMC. NMPF looks forward to working closely with USDA to ensure that any remaining producer questions or concerns are addressed as the implementation process unfolds.