Michigan dairy producers are facing a Sept. 20 deadline to enroll in the USDA’s Dairy Margin Coverage (DMC) program for 2019. As the 2019 enrollment period draws to a close, the Farm Service Agency (FSA) estimates more than $257.7 million in payments to producers who are currently registered.
Nearly half of the producers are taking advantage of the 25% premium discount by locking in for five years of margin protection coverage. According to current DMC enrollment data, 19,132 eligible dairy operations have enrolled nationwide, representing nearly 75% of all U.S. dairy operations, with an average $13,469 in DMC payments, thus far.
While Michigan enrollment is running at a lower rate — 68%, with only 775 out of 1,133 eligible dairies currently enrolled — the estimated average payout is running higher at $16,632 per operation, with total payments currently pegged at nearly $12.9 million for the state.
According to USDA, DMC payments have triggered for each month from January through July. Dairy producers who elect higher coverage levels could be eligible for payments for all seven months.
For example, a dairy operation that chooses to enroll for 2019 an established production history of 3 million pounds (30,000 cwt.) and elects the $9.50 coverage level on 95% of production will pay $4,275 in total premium payments for all of 2019 and receive $15,437.50 in DMC payments for all margin payments announced to date. Additional payments will be made if calculated margins remain below the $9.50/cwt level for any remaining months of 2019.
Authorized by the 2018 Farm Bill, the program offers reasonably priced protection to dairy producers when the difference between the all-milk price and the average feed cost (the margin) falls below a certain dollar amount selected by the producer.
Enrollment for 2020
Dairy producers can begin sign-up for 2020 DMC enrollment Oct. 7 through Dec. 13, 2019, and can choose between the $4 to $9.50 coverage levels.
DMC offers catastrophic coverage at no cost to the producer, other than an annual $100 administrative fee. Producers can opt for greater coverage levels for a premium in addition to the administrative fee. Operations owned by limited resource, beginning, socially disadvantaged or veteran farmers and ranchers may be eligible for a waiver on administrative fees.
Producers will also have the choice to lock in coverage levels until 2023 and receive a 25% discount on their DMC premiums. Dairy operations who locked in coverage in the 2019 sign-up must certify the operation is producing and commercially marketing milk and pay the annual administrative fee during the 2020 enrollment period.
To assist producers in making coverage elections, USDA partnered with the University of Wisconsin to develop a DMC decision support tool, which can be used to evaluate various scenarios using different coverage levels through DMC.
2019 Retroactive Intergenerational Transfers
Participating dairy operations that had an intergenerational transfer between 2014 and 2019 will a have a one-time opportunity to increase its established production history during the 2019 and 2020 annual coverage election periods. Retroactive payments based on the increased production history will apply for 2019 and not prior years.
A dairy operation may add to its approved production history for an intergenerational transfer when a spouse, child or grandchild join a participating dairy operation. Non-lineal relatives, such as siblings, cousins, nieces or nephews, who join the operation will not be eligible for a production history increase.
The increase to the established production history of the participating dairy operation will be determined based on multiplying both the national rolling herd average data for the current year in effect at the time of the intergenerational transfer and the number of cows purchased by the joining family member within 60 days of joining the dairy operation.
For an intergenerational transfer to be recognized by FSA, the requesting dairy operation will meet all eligibility requirements including an ownership provision for those entering the business.
Applications for an intergenerational transfer must be submitted by Dec. 6, 2019, for approval by the local FSA county committee to be eligible for the increased production history effective on January 1, 2019.
For more information, visit farmers.gov DMC webpage or contact your local USDA service center.