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USDA Reveals Scope of First DMC Payments

March 5, 2019

Farmers who elect to receive payments under the new Dairy Margin Coverage program at the new $9.50 per cwt. premium level would receive a payment of $1.51 per hundredweight for their January production after they sign up for the program starting June 17, according to price reporting from USDA’s National Agricultural Statistics Service.

That compares with a payment of $0.01 – a penny per hundredweight — under coverage at the maximum level of the old Margin Protection Program, the flawed dairy support NMPF pushed hard to replace in the farm bill.

USDA’s National Agricultural Statistics Service in February caught up on agricultural price reporting that was delayed due to the earlier partial government shutdown that ended in January, reporting prices needed to determine the final, December 2018, margin under the old Margin Protection Program (MPP) and the first, January 2019, one under the renamed Dairy Margin Coverage (DMC) as revised by the 2018 Farm Bill.  While the Farm Bill increased the dairy margin coverage ceiling from $8.00 to $9.50 per cwt., it did not change the margin calculation formula.

The December 2018 margin, the last governed by the MPP, was $7.85 per cwt., generating a final $0.15 per cwt. payment for producers with coverage for 2018 at the previous maximum level of $8.00. Total payments for those with such coverage averaged $0.45 per cwt., net of premiums and sequestration, for up to 5 million pounds of production history during the 2018 calendar year. The January 2019 margin was $7.99 per cwt. – a figure of negligible importance under the old program but one that would generate a substantial payment under the new one for farmers who elect to cover themselves at the maximum level for “Tier 1” production.

Coverage retroactive

Agriculture Secretary Sonny Perdue indicated on Feb. 26 that signup for the 2019 program would begin by June 17 this year, with coverage retroactive to January. The closing date for signup has not been announced.

The new farm bill also removes the previous restriction that prohibited producers from enrolling milk in both the MPP program and the Livestock Gross Margin for Dairy (LGM-Dairy) program during the same month. It further allows farmers previously prevented from enrolling in MPP during 2018 due to this restriction to enroll retroactively in MPP and collect payments for 2018 for the months during which they were prevented from doing so. NMPF actively supported both provisions during farm-bill negotiations and is urging the USDA to effectively communicate information that will help farmers make the best decisions for their operations.

USDA’s MPP margin forecasts can be accessed online. NMPF’s Future for Dairy website offers a variety of educational resources to help farmers make better use of the program.