Perdue: USDA won’t reopen Dairy Margin Coverage

Colleen Kottke
Wisconsin State Farmer
Agriculture Secretary Sonny Perdue speaks about the coronavirus in the Rose Garden of the White House, Wednesday, April 15, 2020, in Washington. (AP Photo/Alex Brandon)

For weeks, state and national dairy groups along with lawmakers representing hard-pressed constituents back on the farm have been calling on U.S. Department of Agriculture Secretary Sonny Perdue to re-open the Dairy Margin Coverage (DMC) program.

Perdue effectively shut the door on that request during a media briefing on the evening of April 17.

"The Dairy Margin Coverage program is just like the safety net for crops. It doesn't make any sense to have an insurance program and allow people to retroactively decide to add coverage after they need it," Perdue said. "We literally begged people to sign up last year."

DMC is a voluntary program that provides dairy operations with risk management coverage that will pay producers when the difference (the margin) between the national price of milk and the average cost of feed falls below a certain level selected by the program participants.

As milk prices surged upward at the end of 2019, many dairy producers across the country opted against enrolling in the program which was expected to pay farmers little to nothing this year based on forecasted prices. According to the USDA, a little over a third of the country's licensed dairy farms enrolled in the program.

What dairy producers couldn't foretell was a pandemic sweeping across the country, shutting down schools and restaurants, bringing the food service industry to a near standstill and upsetting the dairy supply chain. With demand reduced by 10%, many processors across the country have no market for milk and have asked dairy farmers to either dump their milk or reduce production.

U.S. Rep. Ron Kind was among members of the Wisconsin Congressional Delegation that sent a letter to Perdue, pressing him to take immediate action on behalf of Wisconsin dairy farmers and dairy processing businesses during the crisis. They specifically asked the Ag Secretary to reopen the DMC program.

"Even before the COVID-19 pandemic, Wisconsin was losing an average of two dairy farms a day. This year, farmers were looking forward to turning things around, only to be hit with a pandemic that shuttered many of the businesses they rely on most," Kind said during a press conference. "I continue to be confused as to why Secretary Perdue has refused to open the DMC program. Reopening the DMC program would be a quick an effective way to ensure we do not lose farms permanently to this crisis."

According to USDA data, sign up for this year's DMC program was down nearly 20% from 2019. Last year, more than 23,000 operations (of which 82% were eligible) were enrolled — covering about 180 billion pounds of milk. However, that enrollment dropped to 63% in 2020, thanks to a more optimistic outlook for milk prices in the coming year.

Perdue says he feels very strongly about the principle of an insurance program. 

"(By reopening enrollment) it only trains people to not take the insurance as they should and then apply for ad hoc or disaster subsidies later when the prices go down,"

Many farmers who opted against enrolling in the Dairy Margin Coverage program for 2020, may find themselves out of luck.

Jeff Lyon, general manager of FarmFirst Dairy Cooperative, says farmers who made decisions based on 2020 dairy futures forecasts need a second chance.

"These have been extraordinary and unforeseen changes in dairy markets that have negatively impacted the entire industry, from farm gate to dairy case at the grocery store," Lyon said. "Everyone is reeling, attempting to adjust to our current situation and to do so quickly. Right now, dairy farmers are concerned about not having sufficient cash flow to keep their farms operating, which is why we urge the Secretary to consider additional emergency measures."

Two large industry trade groups, the National Milk Producers Federation and the International Dairy Foods Association, proposed a supply management program that would run for six months starting in April and would boost farmers’ milk prices through government payments — but only if farmers cut production by 10%.

Perdue rejected the proposal, saying that any type of supply management would have been very costly and needed much more examination over the long term. 

The Ag Secretary instead said the USDA chose to indemnify dairy producers in other ways rather than open the DMC program retroactively, including the use of direct payments.

During the press conference, Perdue unveiled details of the $19 billion Coronavirus Food Assistance Program (CFAP) that includes $16 billion in direct support— including $2.9 billion for dairy farmers and 5.1 billion for cattle farmers and ranchers — based on actual losses for agricultural producers where prices and market supply chains have been impacted. This monies will assist producers with additional adjustments and marketing costs resulting from lost demand and short-term oversupply for the 2020 marketing year caused by COVID-19.

The agency also announced it will purchase $3 billion in fresh produce, dairy and meat in an effort to stimulate markets and get products to the food insecure.

According to the CFAP, the newly laid out program will begin with the procurement of about $100 million per month in a variety of dairy products, $100 million in meat and $100 million in fresh fruits and vegetables.

Rick Barrett of the Milwaukee Journal Sentinal contributed to this report.