WASHINGTON, DC – Extreme price volatility and COVID-19 pandemic-induced market fluctuations are part of the reason for an increase in dairy farmers enrolling in the Dairy Margin Coverage (DMC) program for 2021.
The voluntary program exists to provide a level of risk protection to dairy producers under low margin conditions when milk prices are low and or feed costs, on average, are high. Payments are made by USDA when the calculated national margin falls below a producer’s selected coverage trigger with the margin defined as the difference between the average price of feedstuffs (the price of hay, corn, and soybean meal) and the national all-milk price.
Almost 19,000 operations nationwide, or 75 percent of all dairy farms with established production history are enrolled in the program this year and the Farm Service Agency (FSA) reports this represents a 50 percent year over year increase.
According to the American Farm Bureau Federation (AFBF), persistently high feed prices, strong domestic supply, and large product stocks will continue to pressure these margins from both the cost of production and market price angle.
While the potential for increased exports offers an opportunity for supply relief, short-run market conditions have triggered DMC payments for producers at or above the $6.50 margin rates for Tier I and II protections. So until feed costs recede or the all-milk price increases to a margin higher than $9.50, at least some producers will continue to receive program payouts.
(SOURCE: All Ag News)