Tag: dairy margin coverage

NMPF Co-op Member Champions DMC, Calls for FMMO Update at Dairy Hearing

Posted on by Theresa Sweeney

Seventh-generation Pennsylvania dairy farmer Lolly Lesher emphasized the importance of farm bill safety net programs and called for milk pricing improvements at a House Agriculture Committee hearing held on June 22 to review the dairy provisions of the farm bill.

The Farm Bill, a twice-a-decade reauthorization of USDA programs, includes provisions important to dairy farmers such as risk management, pricing policy and support, conservation, trade promotion, nutrition, and rural development programs.

“The Dairy Margin Coverage (DMC) program is a significant improvement over its predecessor and has been a strong safety net for dairy farmers during difficult times. It offers producers affordable coverage for margin levels that reflect the milk price and feed cost challenges they face,” Lesher said in her testimony.

Lesher, a member-owner of Dairy Farmers of America, testified on NMPF’s behalf. She thanked Ranking Member G.T. Thompson (R-PA) for his years of advocacy on behalf of dairy farmers in Pennsylvania and beyond, and for his key role in overhauling the dairy safety net during the last farm bill. She also expressed her gratitude to Chairman David Scott (D-GA) for his work and for convening the hearing.

Created to replace the previous Margin Protection Program at NMPF’s urging in the 2018 Farm Bill, USDA’s Dairy Margin Coverage program offers effective margin protection for small and mid-sized farms and affordable catastrophic coverage for large farms. Lesher, whose family milks 240 cows in southeastern Pennsylvania, said in her written testimony that the program “has provided important security to [her] family’s farm” and noted that her family has purchased the maximum available coverage every year.

She also urged the committee to make additional updates to reflect current production. Congress enacted Supplemental Dairy Margin coverage payments to account for modest production increases since 2014, and Lesher urged the committee to build on this progress in the next farm bill.

Lesher highlighted the need for improvements to the Federal Milk Marketing Order (FMMO) system, citing the heavy revenue losses incurred by dairy farmers nationwide from a milk pricing change made in the previous farm bill as an example of the need for change.

“The change made to the Class I mover combined with the government’s heavy cheese purchases cost dairy farmers over $750 million in revenue in the last six months of 2020 alone,” she said. Lesher detailed the asymmetric risk that farmers bear under the current mover, with limited upside risk and a potentially limitless downside.

Meanwhile, NMPF is leading a nationwide effort to craft consensus on a wide range of FMMO improvements, including the Class I mover, that can be taken to USDA for consideration in a federal order hearing. “We recognize that for our efforts to succeed, we must all work together, giving a bit to get a bit. It’s just too important for our future,” Lesher added.

“We appreciate the opportunity to share what has worked well—and what needs to be modernized—to meet the needs of dairy farmers in the 2023 Farm Bill,” said Jim Mulhern, president and CEO of NMPF.  “As Lolly Lesher outlined during today’s hearing, dairy producers need continued access to an effective safety net, flexible risk management tools that protect all farmers, and an update to the FMMO system that addresses the unequal risk dairy farmers bear compared to processors during unusual market volatility. We look forward to our continued work with the House Agriculture Committee and USDA on these and other farm bill priorities in the coming months.”

NMPF’s Bjerga on the Dairy Economy, FMMO Modernization and Fake Milk

Posted on by Alan Bjerga

 

NMPF Senior Vice President for Communications, Alan Bjerga, discusses dairy issues ranging from pricing to fake milk with KASM radio of Albany, MN, at the National Association of Farm Broadcasters Issues Forum in Washington, DC. Record milk prices are coming with higher costs as well; meanwhile, NMPF is positioned to lead on Federal Milk Marketing Order modernization, a farmer-led process.

Surging Feed Costs Drop the February DMC Margin

Posted on by Theresa Sweeney

The second highest monthly surge in feed costs since the emergence of margin protection as the main federal safety net for farmers lowered the Dairy Margin Coverage Program margin by $0.34/cwt, to $11.20/cwt, in February.

Steady increases in feed costs for the past year and a half were kicked into a yet higher gear by the developing Russia-Ukraine situation, raising fears of reduced global grain production. The February DMC feed cost was $13.50/cwt, up $0.84/cwt from a month earlier and the highest since the introduction of margin protection in 2014. Two-thirds of this increase came from a jump in the price received by U.S. farmers for corn.

Offsetting the jump somewhat – but not enough – was an increase of the U.S. average all-milk price by $0.50/cwt to $24.70/cwt.

The dairy and grain futures markets currently indicate the DMC margin will gradually increase during the remainder of 2022.

NMPF’s Bjerga on How DMC Fights Inflation

Posted on by Alan Bjerga

 

NMPF Senior Vice President of Communications Alan Bjerga explains how the Dairy Margin Coverage Program helps protect farmers against rising feed-cost inflation by factoring in higher expenses even as milk prices reach records. Bjerga also talks about the potential market effects of Russia’s invasion of Ukraine and spells his last name for listeners in an interview with WEKZ radio, Janesville, Wisconsin.

NMPF Statement on USDA’s Extension of 2022 DMC Signup

Posted on by Theresa Sweeney

Statement from NMPF President and CEO Jim Mulhern on USDA’s Extension of 2022 DMC Signup:

“Dairy farmers thank USDA and Secretary Vilsack for extending signup for this year’s Dairy Margin Coverage Program in order to maximize producer signup for this important program. DMC offers cost-effective margin protection for small and medium-sized producers and inexpensive catastrophic coverage for larger dairies. It provides critical protection against unforeseen market disruptions – and if the past two years have shown anything, it’s that unforeseen market disruptions can happen. We urge all producers to sign up for DMC protection, part of a suite of NMPF-supported, federally backed risk-management that also includes the Dairy-RP and LGM-Dairy programs.”

For more information on DMC and NMPF’s support for effective risk management, visit NMPF’s website here.

December DMC Margin Comes in Just Above Payment Threshold

Posted on by Theresa Sweeney

2021 narrowly missed being the first calendar year during which the Dairy Margin Coverage program would have made payments at the maximum $9.50/cwt coverage level during every month. But a milk-price surge prevented that from happening.

The December margin under the program was $9.53/cwt, $0.39/cwt. higher than November’s margin and above the threshold needed to trigger payments at the maximum coverage level. From November to December, the all-milk price gained $1.00/cwt, to $21.80/cwt, while the DMC feed cost gained $0.61/cwt. On a per hundredweight of milk basis, half of the feed-cost increase was from higher soybean meal prices, one-third from higher corn prices, and one-sixth from higher premium alfalfa prices.

Late January dairy and grain futures continued to indicate a very small likelihood for payments during 2022; still, the generally strong milk price outlook has shown volatility in recent weeks, and grain prices have been showing renewed strength.

Signup for the 2022 DMC program is underway and will close on Feb. 18. Last year’s program has paid out nearly $1.2 billion to 18,800 enrolled operations as of Jan. 31. NMPF is urging dairy farmers who haven’t yet joined DMC to do so. NMPF has a page of resources for members who may have questions here.

November DMC Margin Rises, Generates Smallest Payment Since 2020

Posted on by Theresa Sweeney

The November margin under the Dairy Margin Coverage program was $9.14/cwt, up $0.60/cwt. from October, as higher milk prices more than offset gains in feed costs. The new calculation will generate a payment of $0.36/cwt. for $9.50/cwt. coverage, which will be the smallest since September 2020.

The all-milk price component of the November margin was $20.80/cwt., $1.10/cwt. higher than a month earlier. The November DMC feed cost was also higher for the month, by $0.50/cwt., with nearly equal contributions from higher corn and soybean meal prices. The November premium alfalfa hay price was down slightly from a month earlier after rising steadily almost every month since September 2020.

The end-of-year dairy futures indicate a possible small payment to $9.50/cwt. coverage for December, but the current strong milk price outlook makes this questionable for future months, given the current market outlook.

Signup for the 2022 DMC program is underway and will close on Feb. 18. This year’s program has paid out $1.2 billion as of January 3, and NMPF is urging dairy farmers who haven’t yet joined the program to do so. NMPF has a page of resources for members who may have questions here.

NMPF’s Bjerga on DMC

Posted on by Alan Bjerga

NMPF Senior Vice President of Communications Alan Bjerga discusses this year’s enhanced benefits under the Dairy Margin Coverage Program on RFD-TV. A better feed-cost calculation and a production update for some smaller producers- are 2022 highlights for DMC, which along with risk-management initiatives such as Dairy-RP and LGM-Dairy from USDA, offer a wide range of tools for producers, all made more workable and useful via NMPF advocacy.

NMPF’s Galen on DMC Signup

Posted on by Alan Bjerga

 

NMPF Senior Vice President Chris Galen discusses this year’s signup for the Dairy Margin Coverage program with Michael Clements of the National Association of Farm Broadcasters. This year’s DMC features a production update for some producers and an improved feed-cost calculation, further enhancing its value as a risk-protection program for dairy farmers.

DMC Signup to Begin; USDA, Congress Thanked for NMPF-Backed Improvements

Posted on by Theresa Sweeney

The National Milk Producers Federation is urging farmers to sign up for maximum coverage in 2022 under the Dairy Margin Coverage (DMC) program, which USDA today announced will open for enrollment from Monday, Dec. 13, through Feb. 18. This year’s DMC signup is accompanied by new enhancements that make the program even more valuable for producers seeking protection against unforeseen market risks.

“Signing up for DMC, which offers cost-effective margin protection for small and medium-sized producers as well as inexpensive catastrophic coverage for larger dairies, is a no-brainer for 2022, especially considering the improvements we fought for in Congress and advocated for at USDA,” said Jim Mulhern, president and CEO of NMPF. “This year has illustrated just how valuable this program is for those producers that can take advantage of it, and DMC will once again be an essential part of many farmers’ risk management in the coming year. We thank Congress and USDA for making the program stronger and helping dairy farmers in challenging times.”

DMC is part of a suite of federally backed risk-management tools, including the Dairy Revenue Protection (DRP) program and the Livestock Gross Margin for Dairy Producers (LGM-Dairy) program, which were revamped in the 2018 Farm Bill at NMPF’s urging. DMC resulted from NMPF’s effort to improve inadequate federal margin-protection insurance. LGM-Dairy and DRP were made workable via NMPF’s efforts to remove spending caps and a ban on enrollment in multiple programs, which previously limited their usefulness.

More than $1.1 billion – a record – in DMC payments are expected to be distributed to dairy producers under the 2021 program, according to USDA data as of Dec. 6.

While DMC in 2022 will fully incorporate the premium-quality alfalfa price into the DMC feed cost formula, an improvement from the current structure that uses a 50-50 blend between the premium-quality price and the regular price, USDA will make retroactive payments to producers to January 2020. Meanwhile, the new Supplemental Dairy Margin Coverage program will enable some producers who are also enrolled in DMC to receive additional payments reflecting increases in their production since 2014 retroactively to January 2021.

Both improvements occurred at NMPF’s urging. The alfalfa recalculation also will further benefit dairy in the next farm bill, as it will increase the amount of funds available for all programs that benefit dairy farmers.

October DMC Margin Shows Another Large Monthly Increase

Posted on by Theresa Sweeney

The October margin under the Dairy Margin Coverage program was $8.77/cwt, $1.85/cwt higher than a month earlier, as prices rose and feed costs fell. The October margin will produce a payment of about $0.73/cwt for coverage at the $9.50/cwt level. When eventually topped up with the full dairy-quality alfalfa cost figured in, this payment will rise to $0.96/cwt.

The October DMC feed cost dropped $0.55/cwt from a month earlier, mostly on a lower corn price, while the milk price rose by $1.30/cwt to $19.70/cwt. The increase was the third largest one-month increase since milk price-minus-feed cost margins were first calculated for federal dairy safety-net programs in 2014. Together with August’s increase, October’s margin rose $3.53/cwt over a two-month period.

The recent strength of milk prices is expected to continue through the end of the year, potentially ending this year’s unbroken string of margins below $9.50/cwt.