2022 Dairy Margin Coverage Improvements Announced

Program Has Been Expanded for Supplemental Production

Yesterday, the National Milk Producers Federation (NMPF) and the USDA shared important information about expected Dairy Margin Coverage (DMC) updates. The USDA will open signup for the DMC program on Monday, December 13, 2021, and it will run to February 18, 2022. The program has been expanded to allow dairy producers to better protect their operations by enrolling supplemental production. By enrolling in DMC, dairy producers can get coverage through this important safety-net program for another year as well as get additional assistance through the new Supplemental DMC.

Supplemental DMC will provide $580 million to help small- and mid-sized dairy operations that have increased production over the years but were not able to enroll the additional production. Now, they will be able to retroactively receive payments for that supplemental production. Additionally, USDA’s Farm Service Agency (FSA) updated how feed costs are calculated, which will make the program more reflective of actual dairy producer expenses.

The Center will continue to get information from the USDA and FSA and provide additional updates as announcements are made. If you have questions in the meantime, please contact Zach Myers who can help you find the answer.

DMC Enrollment

USDA plans to open the 2022 Dairy Margin Coverage sign-up on Monday, December 13 and keep it open through Friday, February 18, 2022.  This will be for those producers who did not initially sign up for full, five-year coverage through the duration of the Farm Bill, which runs through 2023.

After making any revisions to 2021 DMC contracts for Supplemental DMC, producers can sign up for 2022 coverage. DMC provides eligible dairy producers with risk management coverage that pays producers when the difference between the price of milk and the cost of feed falls below a certain level. So far in 2021, DMC payments have triggered for January through October for more than $1.0 billion.

For DMC enrollment, producers must certify with FSA that the operation is commercially marketing milk, sign all required forms and pay the $100 administrative fee. The fee is waived for farmers who are considered limited resource, beginning, socially disadvantaged, or a military veteran. To determine the appropriate level of DMC coverage for a specific dairy operation, producers can use the online dairy decision tool.

Learn More About DMC Enhancements on Monday, Dec. 13

NMPF will host a Zoom webinar next week to explain these DMC enhancements. The webinar will be held Monday, Dec. 13 at 2 p.m. Eastern Time. Register is required. Click here to sign up.

Supplemental DMC

Eligible dairy operations with less than 5 million pounds of established production history may enroll supplemental pounds based upon a formula using 2019 actual milk marketings, which will result in additional payments. Producers will be required to provide FSA with their 2019 Milk Marketing Statement.

Supplemental DMC coverage is applicable to calendar years 2021, 2022 and 2023. Participating dairy operations with supplemental production may receive retroactive supplemental payments for 2021 in addition to payments based on their established production history.

Supplemental DMC will require a revision to a producer’s 2021 DMC contract and must occur before enrollment in DMC for the 2022 program year. Producers will be able to revise 2021 DMC contracts and then apply for 2022 DMC by contacting their local USDA Service Center.

Updates to Feed Costs

As previously announced, USDA is fully incorporating 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 lower quality alfalfa. Payments will be made retroactively to producers for both 2020 and 2021, but eligible farmers do not need to take any action to receive these payments. This improvement will enhance the dairy baseline ahead of the next farm bill.

USDA is also 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%. The amended feed cost formula will make DMC payments more reflective of actual dairy producer expenses.