Learn About the New Dairy Margin Coverage Program

Learn About the New Dairy Margin Coverage Program

Article By: Jenny Jereczek

With margins remaining tight for dairy farmers, seeking out all available opportunities to support cash flow is extremely important. The new Dairy Margin Coverage (DMC) program authorized in the 2018 Farm Bill has an increased "margin" threshold to $9.50/cwt, which replaces the $8/cwt limit under the Margin Protection Program. Coverage can range from five percent to 95 percent of a farm's milk production history, but can only be covered in five percent increments.

Two tiers also were created with the new DMC:

  • Tier 1 coverage is the first five million pounds of production covered by a farm.
  • Tier 2 coverage remains capped at $8/cwt.

Farmers can choose to sign up for DMC coverage for just 2019, or they can make a one-time election to sign up for coverage through 2023 at the same coverage levels and be eligible to receive a 25 percent discount on the premiums.

The USDA has already released the actual margin price for January, which was $7.99/cwt. How does the payment work? Here's an example if the $9.50/cwt election was chosen:

Election Chosen                              $9.50/cwt
- Actual Margin Price                    -  $7.99/cwt
Payment Issued                              $1.51/cwt

DMC signup is scheduled to begin on June 17th at your local FSA Office. (To find your local office, a directory is available here.)  This means payment amounts for up to the first five months of the year may already be known when sign-up begins.

The 2018 Farm Bill also removed the restriction on participation in both the DMC and the LGM (Livestock Gross Margin) program. The Dairy Revenue Production (DRP) Insurance product also is available and can be used in combination with the before mentioned products. To find out more about DRP, contact Jenny Jereczek or Mark Chilson at our Durand office at 715-672-4237.

Producers should become familiar with these products and implement as appropriate.