The sign-up period for 2021 Dairy Margin Coverage opens Tuesday, Oct. 13.
The voluntary risk management program pays out when the difference between the all-milk price and the average feed price falls below a dollar amount selected by the producer.
Dairy Margin Coverage is not the only way milk producers can protect their livelihood. There’s Dairy Revenue Protection, Livestock Gross Margin and forward contracting as well.
But DMC is USDA’s marquee program, and it’s particularly well suited to aid the modest-sized farms that are common in the Northeast. The first 5 million pounds of annual production gets favorable pricing.
“I would say dairy now has the best safety net of any part of agriculture,” Rep. Collin Peterson, chairman of the House Agriculture Committee, said last month.
Yet many farmers passed on Dairy Margin Coverage last fall when 2020 coverage was available — possibly because the program wasn’t expected to pay much at the time.
Of course, insurance exists to protect against the unexpected, and the unexpected came in the form of a global pandemic that took a sledgehammer to institutional demand for dairy products.
The more than 13,000 farms that did sign up for coverage will get an average of $14,600 per operation this year, according to USDA.
Dairy groups asked that the sign-up period be reopened after the pandemic started causing havoc, but Ag Secretary Sonny Perdue refused. You can’t insure against a loss that has already happened, he said.
Farmers were able to cover some of their losses with direct payments from the Coronavirus Food Assistance Program, but not every market downturn in the future will be so monumental as to send the federal government scrambling to the aid of farmers.
Peterson clearly sees Dairy Margin Coverage as a key piece of modern dairy farm finances.
“You can go to your banker and say, ‘No matter what happens in the marketplace, I know I’m going to be able to get this much revenue,’” he said.
It’s possible that politicians and lenders may come to expect farms to use risk management as a condition for getting certain types of assistance, or at least look less favorably on those who don’t take advantage of such programs.
More fundamentally, though, risk management could contribute to your family’s financial security.
With so much uncertainty still hanging over the economy, you owe it yourself to take a hard look at the role Dairy Margin Coverage can play in your farm business before the sign-up window closes Dec. 11.
Sign up for Dairy Margin Coverage here.
Philip Gruber can be reached at firstname.lastname@example.org