With an assured payout for 2019, participation is high in USDA’s Dairy Margin Coverage Program — which replaced the underperforming Margin Protection Program.
The program insures a producer’s margin between a national all-milk price and a national average feed cost when that margin falls below a certain dollar amount selected by the producer — from $4 to $9.50 per hundredweight of milk.
Enrollment closed on Sept. 27 for 2019, but the new program is retroactive to Jan. 1 — and program margins have already been calculated for the first eight months of the year. The program margin was below $9.50 for seven months and below $9 for five months.
So dairy farmers knew indemnity payments were assured at the highest coverage level for January through July, and they took advantage of that assurance.
On Tuesday, USDA Farm Service Agency reported 80.3% of dairy operations with established production history for participating in USDA programs signed up for DMC.
The 20,800 participating operations are expected to receive indemnity payments totaling more than $305 million for 2019.
The program is geared for average milk production in the U.S. of 5 million pounds annually, which represents a herd of 200 to 250 cows. It offers lower premiums and higher insurable margins (above $8) than the Margin Protection Program for that average amount of production.
Most large producers in the West saw little benefit in MPP beyond the free catastrophic coverage of a $4 margin.
In addition to program calculations that were out of line with their milk prices and feed costs, premiums for production above the lower level were too high and (like all producers) they had to insure at least 25% of their production.
But DMC allows larger producers to insure their first 5 million pounds of production at the same affordable premiums as smaller producers. If they insure above the former top margin of $8, they can choose the free $4 margin on the balance of their insured production — instead of having to cover all enrolled production at the same margin in MPP.
In addition, producers can insure as little as 5% of their production.
The changes and the assured payout in 2019 seem to have appealed to large producers in the West. Participation in California is 80.3% of operations with established production history. That figure is 72.9% in Idaho, 72.8% in Texas, 77.4% in New Mexico and 68.1% in Arizona.
Wisconsin, by far, has the highest number of operations enrolled at 5,848 — 86.3% of operations with production history. New York, Minnesota and Pennsylvania follow with 2,352, 2,330 and 2238, respectively.
Nationwide, producers had enrolled a total of nearly 176 billion pounds of milk as of Oct. 7 — 82.5% of established production history and almost 41 billion pounds more than what was enrolled in MPP.
DMC enrollment for 2020 is underway and closes Dec. 13.