Dairy Margin Coverage Payment Triggered for a Second Month in a Row – Cowsmo

Dairy Margin Coverage Payment Triggered for a Second Month in a Row

For the second month in a row, Dairy Margin Coverage (DMC) payments will be issued. Yesterday, USDA’s Farm Service Agency announced that September’s DMC income over feed costs calculation to be $8.62/cwt. This equates that production insured at the $9.50 coverage level will receive a payment of $0.88/cwt.

cattlefeedSeptember’s All Milk price was $24.40/cwt., up 10 cents from August. Premium hay was $342/ton, down $1. Corn was $7.09/bu., down $0.15, and soybean meal was $473.94/ton, down $36.96.

The August DMC margin was $8.08/cwt., down $1.84 from July, thus triggering the first DMC indemnity payment for 2022 at the $9.50, $9 and $8.50 coverage levels.

Phil Plourd with Ever.ag, says the forward-looking margin picture has been dimming as dairy commodity and milk futures prices move lower while corn prices remain stubbornly near $7.00 per lb.

“Things are not at disastrous levels, but margins are more vulnerable than many believed possible a few months ago,” Plourd says. “It’s another reminder that it pays to sign up for DMC – the deadline for 2023 is Dec. 9 – and look at other tools to manage dairy market price risk.”

2023 DMC Enrollment
Farm Service Agency (FSA) Administrator Zach Ducheneaux says that DMC provides critical assistance to both small- and mid-sized dairies in the U.S. by helping them make sure they can manage the numerous and often unpredictable uncertainties that adversely impact market prices for milk.

“This year showed why enrolling in DMC makes good business sense,” he states. “Early in the year, some economists predicted that DMC would not trigger any payments for the calendar year, but then fast forward to now, when we’re starting to see payments trigger and a return on investment.”

DMC payments are triggered when the difference between the national all-milk price and the national average feed cost (the margin) falls below the producer-selected margin trigger, ranging from Tier 1 from $4.00 to $9.50, and Tier 2 from $4.00 to $8.00, calculated monthly.

FSA shares that in 2021, more than 19,000 operations enrolled in DMC and received more than $1.1 billion in payments, with an average payment of more than $62,000 paid. To date in 2022, the number of operations enrolled in DMC fell to 17,776 and triggered more than $47.9 million in indemnity payments for August.

National Milk Producers Federation (NMPF) President and CEO, Jim Mulhern, strongly urged producers to contact their local FSA office and sign up. The deadline to sign up is Friday, Dec. 9.

“The current combination of high prices with costs that can be even higher illustrates the basic value of DMC for producers who can benefit from the program,” Mulhern says. “By calculating assistance via a margin rather than a target price, DMC offers a measure of protection against the current cost volatility that’s challenging many milk producers.”

 

Source: Dairy Herd Management 

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