Dairy Margin Coverage Program Enrollment Falls 27 Percent

WASHINGTON, DC – An improving dairy sector, with higher milk prices and steady or lower input costs, are leading some producers to skip enrollment in the Dairy Margin Coverage (DMC) program from USDA. According to the American Farm Bureau Federation (AFBF), DMC payments last year were triggered in the majority of months, resulting in program payments that exceeded premiums for the highest coverage level and a positive return on the premium for those farmers who elected to participate. In 2020, however, the probability of even one monthly payment is very low due to brightening expectations in milk prices. Even so, some producers are enrolling in the program, either at the free catastrophic coverage level or at higher levels if they elected for the five-year lock-in option. With only 63 percent of last year’s dairies enrolling in 2020, the brighter economic outlook for dairy this year appears to be the culprit. In calculating the income-over-feed-cost margin, AFBF expects to moderate strength in corn and soybean meal prices relative to the past few years, while the all milk price is forecast to remain well above 2016-2019 levels, averaging over $19 per hundredweight for 2020 compared to prices in a range of $15-$17 since 2016.