The Dairy Margin Coverage (DMC) calculators have been nonstop in 2023. In July, the DMC hit its lowest level since the program began in 2019. Zach Myers with Maryland & Virginia Milk Producers gave an update on the overall snapshot of the DMC program in 2023 at the Dairy Financial and Risk Management Conference in Harrisburg, Pa.
Myers shared that more than 17,000 dairies enrolled in the program in 2023, representing 61% of the U.S. dairies. Other statistics he shared included:
- 156.20 billion pounds of milk enrolled
- $1.128 billion in indemnities
- $66,355 per enrolled dairy
The Rest of 2023?
(DMC Decision Tool, 9/11/23)
2023 DMC Theoretical Net Benefit
Myers shared that the hypothetical net total benefit from DMC could add up to a big revenue line.
- Possible benefit for 2023 per 1 million pounds at the $9.50 level - $25,265.47
- Possible benefit for 2023 per 5 million pounds at the $9.50 level - $126,327.37
“December could be the only month that doesn’t pay an indemnity payment in 2023,” Myers said.
Dairy Revenue Protection
While DMC allows producers to select a milk price and average feed cost difference to determine at which they receive assistance, Dairy Revenue Protection (DRP) is designed to insure against unexpected declines in the quarterly revenue from milk sales relative to a guaranteed coverage level. The expected revenue is based on futures prices for milk and dairy commodities, and the amount of covered milk production selected by the dairy producer. The covered milk production is indexed to the state or region where the dairy producer is located.
Above is an example of what DRP looks like as of Sept. 11th at 95% coverage.
“In general, the further out you get the more expensive the policies become because there’s more risk associated with those policies,” Myers said. “Of course, the goal is to protect your production cost.”
“As prices rebound and jump back up above that five-year minimum cost of production, these premiums aren’t necessarily cheap out here, but consider that net that it gives you and then factor your cost of production is very important,” Myers said.
As producers ride out the volatile dairy economy, one big reason that has helped many manage last year is because of the DMC and DRP risk management programs.
