USDA opens DMC signup, expands enrollment coverage

Wisconsin State Farmer
It’s expected that the Supplemental DMC coverage will provide $580 million to better help small- and mid-sized dairy operations that have increased production over the years but were not able to enroll the additional milk production.

The  U.S. Department of Agriculture (USDA) opened signup for the Dairy Margin Coverage (DMC) program and expanded the program to allow dairy producers to better protect their operations by enrolling supplemental production.

This signup period – which runs from Dec. 13, 2021 to Feb. 18, 2022 – enables producers to get coverage through this important safety-net program for another year as well as get additional assistance through the new Supplemental DMC.

Supplemental DMC will provide $580 million to better help small- and mid-sized dairy operations that have increased production over the years but were not able to enroll the additional production. Now, they will be able to retroactively receive payments for that supplemental production. Additionally, USDA’s Farm Service Agency (FSA) updated how feed costs are calculated, which will make the program more reflective of actual dairy producer expenses.  

“Dairy Margin Coverage is a critical safety-net for producers, and catastrophic coverage is free. These DMC updates...improve DMC and other key USDA dairy programs,” Under Secretary for Farm Production and Conservation Robert Bonnie said. “We encourage dairy producers to make use of the support provided by enrolling in supplemental coverage and enroll in DMC for the 2022 program year.”  

National Milk Producers Federation President and CEO Jim Mulhern says the upgrades add more valuable to producers seeking protection against unforeseen market risks. This year has illustrated just how valuable the program is, with the DMC becoming an essential part of many farmers' risk management tools.

As of Dec. 6, USDA data showed more than $1.1 billion in DMC payments are expected to be distributed to dairy producers under the 2021 program, with additional payments forthcoming in the final two months of the year..

Supplemental DMC Enrollment 

Producers who have already signed up through 2023 to qualify for the multiyear discount are still able to benefit from the programs' enhancements by enrolling in Supplemental DMC coverage.  

Eligible dairy operations with less than 5 million pounds of established production history may enroll supplemental pounds based upon a formula using 2019 actual milk marketings, which will result in additional payments. Producers will be required to provide FSA with their 2019 Milk Marketing Statement. 

Supplemental DMC coverage is applicable to calendar years 2021, 2022 and 2023. Participating dairy operations with supplemental production may receive retroactive supplemental payments for 2021 in addition to payments based on their established production history.  

Supplemental DMC will require a revision to a producer’s 2021 DMC contract and must occur before enrollment in DMC for the 2022 program year. Producers will be able to revise 2021 DMC contracts and then apply for 2022 DMC by contacting their local USDA Service Center.  

DMC 2022 Enrollment 

After making any revisions to 2021 DMC contracts for Supplemental DMC, producers can sign up for 2022 coverage. DMC provides eligible dairy producers with risk management coverage that pays producers when the difference between the price of milk and the cost of feed falls below a certain level. So far in 2021, DMC payments have triggered for January through October for more than $1.0 billion.  

For DMC enrollment, producers must certify with FSA that the operation is commercially marketing milk, sign all required forms and pay the $100 administrative fee. The fee is waived for farmers who are considered limited resource, beginning, socially disadvantaged, or a military veteran. To determine the appropriate level of DMC coverage for a specific dairy operation, producers can use the online dairy decision tool. 

Updates to Feed Costs    

The program also received some enhanced features to its feed cost formula, providing a better value for participating producers.

"Industry partners worked hard to advocate for valuable improvements to the feed cost calculation," said John Rettler, a dairy farmer from Neosho, Wis., and president of FarmFirst Dairy Cooperative. "The DMC program has continued to see improvements since it was first implemented, thanks to the feedback farmers continue to share on the program. Clearly, the program continues to be a worthwhile investment, as so far, 10 out of 12 months for the year 2021 have seen payments at the $9.50 level."

The  updated feed cost formula better reflects the actual cost dairy farmers pay for high-quality alfalfa hay.  FSA will calculate payments using 100% premium alfalfa hay rather than 50%.  The amended feed cost formula will make DMC payments more reflective of actual dairy producer expenses.   

Rettler estimates that this change would  have increased 2021 year-to-date feed costs by an average of $0.22/cwt.

"The impact will be approximately $1,700 for each 1 million pounds of milk insured that received indemnity payment," he said.

The change in hay price will be retroactive to January 202, according to the NMPF.

Additional Dairy Assistance  

The announcement of the program's enhancements is part of a broader package to help the dairy industry respond to the pandemic and other challenges.  USDA is also amending Dairy Indemnity Payment Program (DIPP) regulations to add provisions for the indemnification of cows that are likely to be not marketable for longer durations, as a result, for example, of per- and polyfluoroalkyl substances.

FSA also worked closely with USDA's Natural Resources Conservation Service to target assistance through the Environmental Quality Incentives Program and other conservation programs to help producers safely dispose of and address resource concerns created by affected cows. Other recent dairy announcements include $350 million through the Pandemic Market Volatility Assistance Program and $400 million for the Dairy Donation Program.