Producers have been wired to head to the mailbox this calendar year, as Dairy Margin Coverage (DMC) payments have been triggered due to a stretch of low milk income. As expected, another round of DDMC payments will hit producer’s mailboxes soon.
At just $3.52 per cwt., the July DMC margin triggers Tier I indemnity payments at all coverage levels, from the catastrophic price floor of $4 per cwt. to the maximum coverage level of $9.50 per cwt. The top payment is $5.98 per cwt. at the maximum $9.50 coverage level.
According to Erick Metzger, general manager of National All Jerseys, milk protected at the $9.50/cwt. level will realize indemnity payments for more than $4,461 for each 1 million pounds enrolled. The year-to-date payments totaled nearly $21,242 per 1 million pounds covered at the maximum level.
Phil Plourd, president of Ever.ag Insights, says 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.
However, the milk income margin shows signs of improvement in the August DMC calculations that will be announced at the end of September. As of the close of futures trading on the Chicago Mercantile Exchange on Aug. 31, the DMC decision tool forecasts an August margin of $5.66 per cwt.
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.
