December DMC Margin Comes in Just Above Payment Threshold

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.

USDA Announces NMPF-Backed DMC Enhancements, 2022 Signup Underway

NMPF is urging farmers to sign up for maximum coverage in 2022 under the Dairy Margin Coverage (DMC) program.

This year’s signup, with a deadline of Feb. 18, is accompanied by new enhancements that make the program more valuable than ever for producers seeking protection against unforeseen market risks. NMPF-backed improvements include an enhanced feed cost formula to better reflect the cost of high-quality alfalfa hay, and Supplemental DMC enrollment for many producers whose milk production has increased since 2014.

More than $1.2 billion – a record – in DMC payments are expected to be distributed to dairy producers under the 2021 program, according to USDA data as of Jan. 3.

“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, in a statement when the program was announced.

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.

DMC in 2022 will fully incorporate the premium-quality alfalfa price into the DMC feed cost formula, an improvement from the previous structure that used a 50-50 blend between the premium-quality price and the overall average price. USDA also will make retroactive payments to producers using the new formula, dating from 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.

More information about the DMC Program, including a webinar detailing this year’s improvements and a Supplemental DMC Q&A, can be found here.