USDA/FSA ANNOUNCES SIGN-UP FOR THE 2022 DAIRY MARGIN COVERAGE (DMC) PROGRAM
Summary
- Christopher Wolf, E.V. Baker Professor of Agricultural Economics & Director of Land Grant Programs, Charles H. Dyson School of Applied Economics and Management, Cornell University, provided comments regarding the FSA’s recent sign up announcement for the Dairy Margin Coverage (DMC) Program.
- FSA announced sign-up for the 2022 DMC program — enrollment will begin at your county FSA office on Dec 13, 2021 and end on Feb 18, 2022.
- Producers are encouraged to read further before making DMC enrollment decisions.
Slightly edited and reformatted content provided by Chris Wolf on this topic follows.
DMC Sign Up
Recently, USDA’s FSA announced sign-up for the 2022 Dairy Margin Coverage (DMC) program. Enrollment will begin at your county FSA office on Dec 13, 2021 and end on Feb 18, 2022. Producers are encouraged to consider their enrollment level and make a coverage decision in the next couple of months.
Changes and Comments
This year, the DMC program was changed to use the Supreme Alfalfa to better reflect the cost of dairy quality hay. The impact will be to increase the cost of the feed ration and increase indemnities (payments) relative to past values. Past values used a lower priced hay. The supreme alfalfa price in DMC will be back calculated. Enrolled producers will receive a check back to January 2020.
Some producers will be allowed to increase their historic milk production (for the first time since the program came about in 2014). This change will be particularly useful for farmers who had less than 5 million pounds of production base under the program but have grown since 2013. Referred to as “Supplemental DMC Enrollment” the change will allow eligible dairy operations with less than 5 million pounds of established production history to increase their base according to a formula. The formula uses their 2019 actual amount of milk marketed. The 2019 actual marketings will have their previous production history subtracted from it and 75 percent of the difference will be added to the old production history, creating a new production history up to 5 million pounds. Producers must pay additional premiums on the increased production history, but they will also receive retroactive payments on their 2021 coverage. This increase in production history will only be applicable through the 2023 Farm Bill. This change in supplemental DMC enrollment must be made prior to making the 2022 election coverage.
DMC Decision Making
Mark Stephenson, Director, Center for Dairy Profitability, University of Wisconsin – Madison/College of Agricultural & Life Sciences/Agricultural & Applied Economics, has completely rewritten the DMC decision tool. This year, the tool presents the decision data in more tabular form. Please check out the tool at https://DMC.DairyMarkets.org As before, users make coverage selections at the top of the screen. The other tabs across the top will take you to tables Net Benefit Forecasts, Price Forecasts, Historic Performance, and Milk Price Trigger Analysis.
Professor Wolf notes that at the current time, the forecast is essentially for no payments in 2022 given the current strength in the milk market (although feed is expensive). Thinking about this as risk management means that it may still be entirely rational to purchase coverage. There have been many years in the past where payments did not look likely at this time the previous year, but materialized because of weather or other supply or demand shocks. Historically, the DMC program has been a net positive in almost every year (2014 being the exception).
Closing Thoughts
Remember, DMC Program enrollment will begin at your county FSA office on Dec 13, 2021 and end on Feb 18, 2022. Producers are encouraged to consider their enrollment level and make a coverage decision in the next couple of months.
