Another Round of DMC Payments Coming: The Lowest Milk Income Margin Ever
As expected, another round of Dairy Margin Coverage (DMC) payments will be coming to producer’s mailboxes. USDA’s Farm Service Agency announced on Friday that May’s DMC income over feed cost calculation is $4.83/cwt. Milk covered at the $9.50 level will realize an indemnity of $4.63. This is the lowest milk income margin since the inception of the DMC program.
The announced May 2023 U.S. average milk price is $19.30/cwt., the lowest level since September 2021.
For May indemnity payments, each 1 million pounds insured at $9.50/cwt will receive $3,488.10 before sequestration.
Phil Plourd, president of Ever.ag Insights, says that producers are also reminded to utilize risk management tools like Dairy Revenue Protection (DRP).
“These are also times that remind us that risk management requires vigilance and diligence. I don’t think many folks had margins sinking this low in 2023. Yet here we are,” he says.
The DMC program was authorized in the 2018 farm bill to offer protection to producers when the difference between the all-milk price and the average feed price falls below the producer-selected margin trigger.
Jim Mulhern, NMPF CEO, says DMC’s catastrophic coverage level is at the top of his team’s farm bill list.
“The catastrophic coverage level within the basic DMC includes up to 5 million pounds of annual protection, which is about a 200 to 220 cow herd. We’re looking at DMC’s tier 2—anything above basic—adjustments because those markets collapsing would be more akin to a truly ‘catastrophic’ event,” Mulhern says.
