The ongoing milk price rollercoaster that seems to be on a downward track has once again forced a Dairy Margin Coverage (DMC) payment to be issued in 2023. Based on USDA’s Agricultural Prices report released late Wednesday afternoon, the Dairy Margin Coverage income over feed costs for April was $5.84/cwt. Producers with coverage of $9.50/cwt. will realize indemnity payments of $2,735.38 for each one million pounds enrolled.
Compared to March, the all-milk price fell $0.40/cwt. to $20.70, corn rose $0.03/bu. to $6.70, premium alfalfa hay increased $1.00/ton to $315, and soybean meal fell $27.15/ton to $457.25.
Year-to-date $9.50 coverage has paid $8,926.53 for each one million pounds in return for the $1,500 premium. The Farm Service Agency projects payments will continue through October for the highest level of coverage.
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,” says Mulhern.
Phil Plourd, president of Ever.ag Insights, says times like now make producers appreciate programs such as DMC, as well as coverage avenues 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. “Producers with a disciplined approach to monitoring markets and taking action may not be coming out whole in this environment, but they are almost certainly faring better. When is it going to end? Prices are certainly low enough to discourage output, something we expect to see in the months ahead. But there are a lot of moving parts to the market equation, both here at home and internationally.”
