Margin insurance

The USDA has begun to issue checks to dairy farmers who purchased Dairy Margin Coverage insurance.

USDA Farm Service Agency has begun disbursing indemnity payments to farmers who signed up for the new Dairy Margin Coverage Program.

The program is meant to insure a positive margin between milk prices and the cost of feed. Established in the 2018 Farm Bill, DMC replaced the failed Margin Protection Program. It offers lower premiums and higher levels of margin coverage on a producer’s first 5 million pounds of annual production history.

Signup began on June 17 and is retroactive to Jan. 1. Indemnity payments — which would more than cover the cost of the annual premium — had already been determined for January through April when enrollment opened. An additional payment has now been triggered for May

To date, nearly 10,000 operations have enrolled, and FSA has begun paying about $100 million to producers for January through May who signed up to cover an $8, $8.50, $9 or $9 margin per hundredweight of milk.

USDA’s calculated margins are $7.71 for January, $7.91 for February, $8.66 for March, $8.82 for April and $9.00 for May. FSA is forecasting margins below $9.50 for June through August.

The individual indemnity payment in 2019 is expected to total $26,667 for a producer’s first 5 million pounds of enrolled production. The premium and $100 administration fee on that amount of coverage is $7,600, or $5,725 with the 25% discount for locking in coverage levels for five years.

More than 98% of producers who have enrolled have elected the $9.50 margin level on 95% of their production history, FSA reported on Thursday.

The program is geared for average milk production in the U.S. of 5 million pounds annually, which represents a herd of 200 to 250 cows. But larger producers can take advantage of the lower premiums and higher coverage levels on their first 5 million pounds and avoid expensive premiums on the balance of their enrolled production by choosing the no-cost $4 margin on the remainder of their production.

Enrollment for the program closes Sept. 20.

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