Navigate the Dairy Margin Coverage program

New tool available from UW-Extension

USDA’s Farm Service Agency (FSA) announced the signup period for the new Dairy Margin Coverage (DMC) program will open June 17, 2019. Dairy producers who elect a DMC coverage level between $9 and $9.50 would be eligible for a payment for January, February, March and April 2019.

With the FSA signup there is renewed interest by farmers in learning more about the program. Mark Stephenson, Director of the Center for Dairy Profitability at the University of Wisconsin-Madison Division of Extension, created resources to help farmers consider signup strategies for their farm. County Extension Agents can help farmers access information and tools for the DMC program. Farmers can utilize an informative video, chart the current forecasted margin, and access the DMC decision making tool from the website: https://dairymarkets.org/DMC/. For access to Dairy Margin Coverage informational meetings offered in your area visit https://fyi.extension.wisc.edu/farmteam/events/ or contact your local county Extension office https://counties.extension.wisc.edu/.

DMC, which replaces the Margin Protection Program for Dairy (MPP-Dairy), offers protection to dairy producers when the difference between the all milk price and the average feed cost (the margin) falls below a certain dollar amount selected by the producer.

For example, a dairy operation that chooses to enroll an established production history of 3 million pounds (30,000 cwt.) and elects the $9.50 coverage level on 95 percent of production would receive $1,543.75 for March.

 

 

Sample calculation:

$9.50 – $8.85 margin = $0.65 difference

$0.65 x 95 percent of production x 2,500 cwt. (30,000 cwt./12) = $1,543.75

DMC premiums are paid annually. The calculated annual premium for coverage at $9.50 on 95 percent of a 3-million-pound production history for this example would be $4,275.

Sample calculation:

 

 

3,000,000 x 95 percent = 2,850,000/100 = 28,500 cwt. x 0.150 premium fee = $4,275

The dairy operation in the example calculation will pay $4,275 in total premium payments for all of 2019 and receive $9,950 in DMC payments for January, February, March and April combined. Additional payments will be made if calculated margins remain below the $9.50/cwt level.

All participants are also required to pay an annual $100 administrative fee in addition to any premium, and payments will be subject to a 6.2 percent reduction to account for federal sequestration.

For DMC signup, eligibility and related dairy program information, contact your local USDA service center. To locate your local FSA office, visit farmers.gov/service-locator.