This calendar year, Dairy Margin Coverage (DMC) payments have been triggered owing to a period of low milk revenue. Another wave of DDMC payments is likely to arrive in producers’ mailboxes shortly.
The July DMC margin of $3.52 per cwt. triggers Tier I indemnity payments across all coverage levels, from the catastrophic price floor of $4 per cwt. to the highest coverage level of $9.50 per cwt. At the highest coverage level of $9.50, the top payout is $5.98 per cwt.
According to Erick Metzger, general manager of National All Jerseys, milk covered at $9.50/cwt. will receive more than $4,461 in indemnity payments for each million pounds enrolled. Year-to-date payouts have reached almost $21,242 per 1 million pounds insured at the highest level.
According to Phil Plourd, president of Ever.ag Insights, farmers can also use risk management systems such as Dairy Revenue Protection (DRP).
“These are also times when we are reminded that risk management necessitates vigilance and diligence.” I doubt many people expected margins to be this low in 2023. “However, here we are,” he adds.
The DMC program was established by the 2018 farm bill to provide farmers with protection when the gap between the all-milk price and the average feed price falls below the producer-selected margin trigger.
However, the milk revenue margin seems to be improving in the August DMC figures, which will be released at the end of September. The DMC decision tool predicts an August margin of $5.66 per cwt as of the closing of futures trading on the Chicago Mercantile Exchange on Aug. 31.
According to Jim Mulhern, CEO of NMPF, DMC’s catastrophic coverage level is at the top of his team’s farm bill wish list.
“The basic DMC’s catastrophic coverage level includes up to 5 million pounds of annual protection, which is equivalent to a 200 to 220 cow herd.” “We’re looking at DMC’s tier 2 adjustments—anything above basic—because those markets collapsing would be more akin to a truly ‘catastrophic’ event,” Mulhern explains.
