The Department of Agriculture’s Farm Service Agency is giving dairy farmers about eight weeks to decide their 2023 risk management strategy.
FSA on Monday launched 2023 enrollment for the Dairy Margin Coverage Program, the farm bill safety net tool that issues payments when production margins fall below a level set by producers during enrollment. Applications will be accepted until Dec. 7.
FSA Administrator Zach Ducheneaux said DMC “provides critical assistance to our nation’s small- and mid-sized dairies, helping make sure they can manage the numerous and often unpredictable uncertainties that adversely impact market prices for milk.”
FSA announced two changes for 2023 enrollment.
Calculations to determine feed cost – which is used with the all-milk price to determine the margin for the program – will now include an assumption that dairy operations are exclusively using premium alfalfa hay. That reflects a change from the previous 50% used in the figures.
FSA is also allowing supplemental coverage enrollment during the 2023 signup that will be applicable to 2021, 2022 and 2023. The boosted DMC paid out $42.8 million in payments last year and is available to operations with less than 5 million pounds of established production history. The provision is meant to bolster coverage for small- to mid-sized dairies with production they were unable to cover due to a lack of production history.
According to USDA, DMC went the first seven months of 2022 before issuing more than $47.9 million in payments in August, and “an indemnity payment is projected for September as well.”
Ducheneaux said the 2022 dairy production picture “showed why enrolling in DMC makes good business sense.
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“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,” he said.
In 2021, DMC triggered payments for every month but December.
The National Milk Producers Federation encouraged producers to sign up for maximum coverage under the program. For production of up to 5 million pounds a year, coverage levels range from $4 to $9.50 per hundredweight in 50-cent increments and percentages of an operation's production ranging from 5% to 95% in 5% increments.
“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,” said Jim Mulhern, the group’s CEO. “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.”
The maximum coverage level is $8 per hundredweight for production over 5 million pounds.
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