The USDA announced the August Dairy Margin Coverage (DMC) margin was $6.46, the highest since January but still low enough to generate payments for coverage levels between $6.50 and $9.50 per cwt. Milk insured at the $9.50 level will receive an indemnity payment of $3.04 per cwt. Compared to a month earlier, U.S. average feed costs were lower and milk prices were up, pushing the milk income margin up to more than $3 per cwt. from July’s historic low.
According to Phil Plourd, president of Ever.Ag, this could be the last large payment producers will receive this year.
“The August payment counts as the lowest since January and, by our figuring, will probably be the last ‘big’ payment of 2023 now that we’re seeing record high butter prices, a firming powder market and at least a modest bounce in cheese values,” he says. “Programs like DMC, Dairy Revenue Protection and Livestock Gross Margin have been a critical lifeline for producers in what’s been a tough year.”
DMC program indemnity payments have totaled $1.1 billion for the first seven months of the year. Experts believe payments will continue throughout the remainder of the year with the exception of one month.
“December could be the only month that doesn’t pay an indemnity payment in 2023,” Zach Myers with Maryland & Virginia Milk Producers said at the 2023 at the Dairy Financial and Risk Management Conference in Harrisburg, Pa.
As milk prices continue to face uncertainties, producers have been constantly reminded of the importance of these risk management programs.
“Livestock and crop producers alike have been financially impacted by catastrophic natural disaster events, dairy producers’ financial stressors have been compounded by significant market volatilities,” says FSA Administrator Zach Ducheneaux. “Dairy Margin Coverage is a key risk management tool for dairy operations to financially endure the numerous, and often unpredictable uncertainties that adversely impact market prices for milk.”
Based on latest enrollment data as of Sept. 5, 17,002 dairy operations are enrolled in the 2023 DMC program, representing about 73.6% of operations with established production history. To date, January-July DMC payments averaged $66,355 per dairy operation enrolled in 2023.
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