NMPF Senior Vice President of Communications Alan Bjerga explains how the Dairy Margin Coverage Program helps protect farmers against rising feed-cost inflation by factoring in higher expenses even as milk prices reach records. Bjerga also talks about the potential market effects of Russia’s invasion of Ukraine and spells his last name for listeners in an interview with WEKZ radio, Janesville, Wisconsin.
Statement from NMPF President and CEO Jim Mulhern on USDA’s Extension of 2022 DMC Signup:
“Dairy farmers thank USDA and Secretary Vilsack for extending signup for this year’s Dairy Margin Coverage Program in order to maximize producer signup for this important program. DMC offers cost-effective margin protection for small and medium-sized producers and inexpensive catastrophic coverage for larger dairies. It provides critical protection against unforeseen market disruptions – and if the past two years have shown anything, it’s that unforeseen market disruptions can happen. We urge all producers to sign up for DMC protection, part of a suite of NMPF-supported, federally backed risk-management that also includes the Dairy-RP and LGM-Dairy programs.”
For more information on DMC and NMPF’s support for effective risk management, visit NMPF’s website here.
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.
The November margin under the Dairy Margin Coverage program was $9.14/cwt, up $0.60/cwt. from October, as higher milk prices more than offset gains in feed costs. The new calculation will generate a payment of $0.36/cwt. for $9.50/cwt. coverage, which will be the smallest since September 2020.
The all-milk price component of the November margin was $20.80/cwt., $1.10/cwt. higher than a month earlier. The November DMC feed cost was also higher for the month, by $0.50/cwt., with nearly equal contributions from higher corn and soybean meal prices. The November premium alfalfa hay price was down slightly from a month earlier after rising steadily almost every month since September 2020.
The end-of-year dairy futures indicate a possible small payment to $9.50/cwt. coverage for December, but the current strong milk price outlook makes this questionable for future months, given the current market outlook.
Signup for the 2022 DMC program is underway and will close on Feb. 18. This year’s program has paid out $1.2 billion as of January 3, and NMPF is urging dairy farmers who haven’t yet joined the program to do so. NMPF has a page of resources for members who may have questions here.
NMPF Senior Vice President of Communications Alan Bjerga discusses this year’s enhanced benefits under the Dairy Margin Coverage Program on RFD-TV. A better feed-cost calculation and a production update for some smaller producers- are 2022 highlights for DMC, which along with risk-management initiatives such as Dairy-RP and LGM-Dairy from USDA, offer a wide range of tools for producers, all made more workable and useful via NMPF advocacy.
NMPF Senior Vice President Chris Galen discusses this year’s signup for the Dairy Margin Coverage program with Michael Clements of the National Association of Farm Broadcasters. This year’s DMC features a production update for some producers and an improved feed-cost calculation, further enhancing its value as a risk-protection program for dairy farmers.
The National Milk Producers Federation is urging farmers to sign up for maximum coverage in 2022 under the Dairy Margin Coverage (DMC) program, which USDA today announced will open for enrollment from Monday, Dec. 13, through Feb. 18. This year’s DMC signup is accompanied by new enhancements that make the program even more valuable for producers seeking protection against unforeseen market risks.
“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. “This year has illustrated just how valuable this program is for those producers that can take advantage of it, and DMC will once again be an essential part of many farmers’ risk management in the coming year. We thank Congress and USDA for making the program stronger and helping dairy farmers in challenging times.”
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.
More than $1.1 billion – a record – in DMC payments are expected to be distributed to dairy producers under the 2021 program, according to USDA data as of Dec. 6.
While DMC in 2022 will fully incorporate 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 the regular price, USDA will make retroactive payments to producers to 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.
Both improvements occurred at NMPF’s urging. The alfalfa recalculation also will further benefit dairy in the next farm bill, as it will increase the amount of funds available for all programs that benefit dairy farmers.
The October margin under the Dairy Margin Coverage program was $8.77/cwt, $1.85/cwt higher than a month earlier, as prices rose and feed costs fell. The October margin will produce a payment of about $0.73/cwt for coverage at the $9.50/cwt level. When eventually topped up with the full dairy-quality alfalfa cost figured in, this payment will rise to $0.96/cwt.
The October DMC feed cost dropped $0.55/cwt from a month earlier, mostly on a lower corn price, while the milk price rose by $1.30/cwt to $19.70/cwt. The increase was the third largest one-month increase since milk price-minus-feed cost margins were first calculated for federal dairy safety-net programs in 2014. Together with August’s increase, October’s margin rose $3.53/cwt over a two-month period.
The recent strength of milk prices is expected to continue through the end of the year, potentially ending this year’s unbroken string of margins below $9.50/cwt.
NMPF President and CEO Jim Mulhern speaks at the organization’s annual meeting in Las Vegas, NV on Nov. 16.
The September margin for the Dairy Margin Coverage program rose by $1.68/cwt from a month earlier to $6.93/cwt. The jump was driven by a mostly corn price-driven $0.98/cwt drop in the feed cost formula and an $0.80/cwt increase in the all-milk price, to $18.40/cwt.
The resulting $2.58/cwt September DMC payment for $9.50/cwt coverage will be the ninth consecutive such payment well in excess of $2/cwt this year, with the nine-month average totaling $3.08/cwt. When USDA eventually tops up the payments for this year and last with the full dairy-quality alfalfa price figured into the feed cost calculation, the 2021 average payment for the first nine months will be $3.31/cwt.
USDA is expected to pair the announced regulation on the alfalfa price change with that for the separate Supplemental DMC program.
USDA reported that, as of Oct. 25, the 19,029 operations enrolled in this year’s DMC program are expected to receive $981,249,096 in payments, for an average of $51,566 per enrolled operation, based on previously announced margins. This represents payments for January through August and does not include the eventual top-up payments from the alfalfa price change. The dairy futures continue to indicate that there will be at least another DMC payment for $9.50/cwt coverage during the final three months of the year.
