By Jerry Hagstrom
DTN Political Correspondent
and
Chris Clayton
DTN Ag Policy Editor

WASHINGTON, D.C. (DTN) -- The National Milk Producers Federation expects a high rate of participation in the new Dairy Margin Coverage program (DMC) as farmer signup begins Monday.

National Milk President and CEO Jim Mulhern is urging the farmers to sign up amidst industry challenges.

"We are very pleased with the dairy title" in the 2018 farm bill, Mulhern said.

"The DMC provides a stronger safety net for America's dairy producers, one sorely needed as low prices, trade disturbances and chaotic weather patterns combine to create hardships. We have advocated for months that margin calculations must consider the higher feed costs dairy producers pay to properly nourish their livestock. USDA's decision to include premium and supreme quality alfalfa feed is appropriate and is another win for dairy farmers that will provide additional, crucial aid."

Agriculture Secretary Sonny Perdue formally announced in a news release Friday that farmers can begin signing up for the DMC at their county Farm Service Agency offices on Monday, June 17.

Perdue noted FSA personnel had met the Trump administration's goal of making the DMC a top farm-bill implementation priority.

"This new program offers 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," USDA noted in the release.

"With an environment of low milk prices, high economic stress, and a new safety net program with higher coverage levels and lower premiums, it is the right time for dairy producers to seriously consider enrolling when signup opens. For many smaller dairies, the choice is probably a no-brainer as the retroactive coverage through January has already assured them that the 2019 payments will exceed the required premiums," Perdue said.

Mulhern said at a new conference that farmers need the program because, "this is the fifth year of low prices. The last good year was in 2014."

The new program replaces the Margin Protection Program, which was created in the 2014 farm program, but which most farmers found not worthwhile.

In a news release, National Milk said, "Producers may cover up to their first 5 million pounds of annual milk production (equivalent to the production of a 200-cow dairy farm) at a margin of up to $9.50 per hundredweight. Payments under the program will be retroactive to Jan. 1."

"Calculations already made for the first four months of the year show that producers signing up at the $9.50 level would receive payments for each of the year's first four months, with total payments well over the already-set annual premium. All producers will be able to access this affordable coverage regardless of size, and larger producers will have access to significantly more affordable $5.00 catastrophic-type coverage."

Mulhern said the program will be most valuable to smaller producers, while it will be "basic" for larger producers.

DMC provides farmers coverage at various levels based on the premium and a $100 annual administrative fee. Farmers can sign up for catastrophic coverage and just pay the $100 fee as well.

DMC has coverage protection levels that range from 5% to 95% in 5% increments. Tier I coverage for the first 5 million pounds of production provides price ranges from catastrophic coverage up to $9.50 per hundredweight in 50-cent increments. Tier II coverage, for production over 5 million pounds, offers coverage up to $8 per hundredweight.

To sign up for DMC, dairy farmers must have established production history based on documentation of actual milk marketing sales. USDA stated that for most operations, production history is based on their highest milk production from 2011-2013. New dairy operations must establish a production history, according to FSA. Enrollment starts Monday, June 17, and continues through Sept. 20. Farmers will complete a DMC contract and make the annual coverage election.

For 2019 enrollment, farmers can lock in coverage at a certain level for five years and receive a 25% discount on their DMC premiums. USDA is only offering this option in the 2019 registration and election.

For farmers who stopped selling milk in 2019, they can still enroll in DMC for the days the dairy operated.

According to USDA, DMC payments are also subject to a 6.2% reduction in 2019 because of budget sequester laws.

House Agriculture Committee Chairman Collin Peterson, D-Minn., a strong advocate of the DMC, has repeated several times some of the same advice he suggested Friday: Farmers should sign up their first 5 million pounds at the maximum coverage level.

"We put this program together in the farm bill to enable farmers to get their revenue from the market in those years when the milk price is up, but still provide a backstop in the event that milk prices come down or feed costs go up. I've said it before and I'll say it again: Dairies should sign up their first 5 million pounds of production history [at] the $9.50 coverage level. I know times are tough, but this program is going to provide some real help."

USDA has a web-based decision tool for DMC that can be found at www.fsa.usda.gov/dmc

Jerry Hagstrom can be reached at jhagstrom@njdc.com

Follow him on Twitter @hagstromreport

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(CZ)

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