January 18, 2022

Sign-up deadline for DMC program

WASHINGTON — The sign-up period for dairymen to enroll in the Dairy Margin Coverage program for 2022 is open until Feb. 18.

“The Dairy Margin Coverage program was authorized under the 2018 farm bill,” said Douglas Kilgore, Farm Service Agency program manager for dairy/special programs.

“It provides dairy operations with risk management coverage that will pay producers when the difference between the price of milk and the cost of feed, which is the margin, falls below a certain level.”

Dairymen can sign up for the Dairy Margin Coverage program at a local Farm Service Agency office.

For the voluntary program, each dairy operation selects a coverage level ranging from $4 to $9.50 per hundredweight in 50-cent increments and a coverage percentage of the dairy operation’s production history ranging from 5% to 95% in 5% increments.

All dairy operations that participate in DMC must have a milk production history and be registered to participate.

“All dairy operations pay a $100 administration fee annually for each year of participation except if the dairy operation qualifies for a waiver for limited resource, beginning farmer, socially disadvantaged or veteran farmers,” Kilgore said.

The USDA is changing the DMC feed cost formula to better reflect the actual cost dairy farmers pay for high quality alfalfa hay.

“FSA will calculate payments using 100% premium alfalfa hay rather than 50%,” Kilgore said. “Previously we used an average of premium and regular alfalfa for the alfalfa feed cost proponent.”

Participating dairy operations with 2020 and 2021 DMC contracts will be eligible for retroactive monthly indemnity payments.

For example, Kilgore said, a dairy operation with $9.50 coverage on 95% of the milk production up to 1 million pounds was previously paid 73 cents per covered hundredweight.

“The new payment rate is 96 cents, so he will get an additional 23 cents per covered hundredweight,” Kilgore said.

“Once the dairy operation has a revised contract and it’s approved, the payments will process overnight and in most cases they will be out within a day or two,” he said.

Dairymen also have the opportunity to sign up for the Supplemental Dairy Margin Coverage program.

“Many of the participating dairy operations have an established milk production history from 2011, 2012 or 2013, so for most operations, the DMC was no longer covering their actual production,” Kilgore said. “With SMDC we are attempting to cover more production history for operations that have increased production.”

To be eligible for SDMC, dairy operations must have DMC established production history of less than 5 million pounds. In addition, the 2019 milk marketings must exceed the established DMC production history.

“The SDMC coverage is applicable for 2021, 2022 and 2023,” Kilgore said.

“Dairy operations with dairy production history over 5 million pounds or who have not increased production over their production history are not eligible for SDMC,” Kilgore said.

“For a dairy operations to establish a supplemental DMC production history, they need to provide a document that describes milk marketings for 2019,” he said. “Each operation must also complete a CCC-800A form which must be accompanied by a CCC-801 contract.”

No coverage changes can be made for the supplemental DMC contracts.

“Established production history and established supplemental production history are separate records for each operation,” Kilgore said. “Once production history is established for a dairy operation, it will be applicable to any future DMC contracts.”

Dairymen who locked in coverage levels for the life of the farm bill when they originally signed up for DMC were granted a discounted premium.

“They will pay the standard premium rate for supplemental pounds of production. There is no discounted premium rate,” Kilgore said.

“A dairy operation that succeeds from another operation may establish supplemental production history from the predecessor dairy operation,” he said. “Dairy operations with production history and supplemental production may transfer the histories.”

There is also an option for re-established dairy operations.

“A dairy operation that dissolves and then starts back up will need to re-establish the production history and supplemental history,” Kilgore said.

Martha Blum

Martha Blum

Field Editor