FSA Announces Three Changes for DMC Program

USDA’s Farm Service Agency (FSA) recently made three announcements for its Dairy Margin Coverage (DMC) program. One: small and mid-sized dairy operations may now retroactively receive payments for increased production that was not previously eligible for enrollment through a program called Supplemental DMC. Two: the sign-up period for DMC 2022 begins December 13. Three: feeding costs have been updated to better reflect the price of feeding premium-quality hay.

Supplemental DMC Enrollment

Eligible dairy operations with less than five million pounds of established production history may receive additional, retroactive payments for production above the amount enrolled based on a formula using actual milk marketed in 2019.

Payments will be based on 75% of the difference between historical production and 2019 production and termed as a producer’s “supplemental production history.” For example, if historical production was three million pounds and 2019 production was four million pounds, an additional 750,000 pounds could be enrolled in the Supplemental DMC program.

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.

To enroll supplemental production, producers will need to revise their existing DMC contracts and provide FSA with their 2019 Milk Marketing Statement. After this is accomplished, they can enroll in DMC for the 2022 program year. To accomplish these two steps, contact your local USDA Service Center.

DMC 2022 Enrollment

After making any revisions to 2021 contracts for Supplemental DMC, producers can sign up for 2022 Dairy Margin Coverage. The enrollment period runs from December 13, 2021, to February 18, 2022.

This enrollment period is for producers who did not initially sign up for full, five-year coverage through the duration of the Farm Bill, which runs through 2023.

Based on the first three years of the program, the $9.50 level of coverage provided the greatest return.

Updates to Feed Costs

USDA is also changing the DMC feed cost formula to better reflect the actual cost dairy farmers pay for high-quality alfalfa hay. FSA will calculate payments using 100% premium alfalfa hay rather than a 50-50 blend between the premium quality price and lower quality alfalfa. Eligible producers do not need to take any action to receive these payments.

According to calculations by National All-Jersey Inc., this change would have increased 2021 year-to-date feed costs by an average of $0.22 per hundredweight. The impact will be approximately $1,700 for each 1 million pounds of milk insured that received indemnity payments.

The hay price adjustment will be retroactive to January 2020. However, keep in mind indemnity payments at the $9.50 level occurred in just five months during 2020.