Frequently Asked Questions

Dairy Margin Coverage Frequently Asked Questions

Program Overview

What is the diary Margin Coverage program

    1. The DMC program offers producers catastrophic coverage at $4.00 at no cost except for a $100 Premium. There are greater coverage levels for various premium costs. A payment is triggered when the difference in the U.S. All Milk Price and a formula of corn, soybean meal, and alfalfa falls below a selected coverage level by the producer.

As a producer what are my choices for DMC? 

    1. Producers must have an established production history with the local FSA office. If they do not have an established history and started milking since January 1, 2019- FSA will help calculate a production history.
    2. The producer must have registered for DMC during the election period of each year. For 2019 this is June 17, 2019 through September 20, 2019.
    3. Pay the $100 administrative fee
    4. Select a coverage level for both Tier 1 and Tier 2 if applicable.
    5. Select the percent of milk production you would like to cover (between 5% and 95%)

Who is eligible to participate in the program? 

    1. U.S. Producers who produce and commercially market milk. Individual producers must be a citizen of the U.S. or a legal resident alien of the U.S. and make contributions including labor, land, management, equipment, or capital to the dairy operation.
    2. Not be associated with a Federal, State or Local Government Agency
    3. Must have commercially marketed milk at the time of DMC enrollment. Exception for 2019 is any operation that milked during any month during the 2019 calendar year is eligible.

What is the difference in multi-producer operations and multi-Dairy opeartions? 

    1. Multi-Producer Operations are operated by more than 1 dairy producers.
    2. Multi-Dairy Operations are Dairy Producers that operate more than 1 dairy operation. 

How is the Margin Calculated?

    1. The margin is the difference between the all U.S. milk price published by USDA National Agricultural Statistics Service (NASS) and a calculated fee price for producing a hundredweight of milk. The feed formula is based on a formula of the national corn price per bushel reported monthly by NASS times 1.0728, the national alfalfa hay price per ton reported monthly by NASS times 0.0137, and the Central Illinois price per ton reported by the Agricultural Marketing Service for soybean meal times 0.00735.

I'm a diary that started milking in 2019, am I eligible for dmc? 

    1. Yes, for 2019 only, the dairy operation that started milking in 2019 is eligible for DMC for the actual days marketing milk.

Can I be enrolled in both the livestock gross Margin-Diary or diary revenue protection and simultaneously be enrolled in dairy margin coverage? 

    1. Yes- the 2018 Farm Bill made it possible for producers to simultaneously be enrolled in multiple programs whereas the 2014 Farm Bill made producers choose.

Dairy Margin Coverage Premium and Indemnities

How is the premium calculated? 

    1. For a dairy operation with 5,000,000 million lbs of milk or 50,000 cwt. and wanting to elect coverage at $9.50 at 95% of their production. The calculation for annual election would be
      1. 50,000 cwt. x 95% = 47,500 cwt
      2. 47,500 x the premium for the $9.50 coverage level ($0.150/cwt.)
      3. 47,500 x $0.15 = $7,125
      4. The premium for one year would be $7,125 plus $100 for enrollment fee.
    2. The calculation for multiyear election would be
      1. 50,000 cwt x 95%= 47,500 cwt
      2. 47,500 x premium of $0.15/cwt at the $9.50 coverage level = $7,125
      3. $7,125 x 75% (100%-25%) for the multi-year discount = $5,343.75
      4. However paid for 5 years = $5,343.75 x 5 years = $25,718.75 plus $100 for enrollment fees each year.

Do I have to pay the administrative fee? 

    1. Yes, you will have to pay the annual $100 administrative fee unless you are classified in one of the following categories: limited resource, beginning farmer or rancher, veteran farmer or rancher, or socially-disadvantaged farmer or rancher.

When does my coverage level pay out? 

    1. The DMC program makes an indemnity payment when the different in the monthly margin is below your chooses coverage level.
      1. Example of a $9.50 coverage level. If the June margin which is the difference of the U.S. all milk price and a feed cost formula of corn, soybean meal, and alfalfa is $8.80 then a 12th of the annual milk production will be multiplied by the difference of the $9.50 and $8.80 or $0.70. So for a producer with 47,500 cwt. of annual milk production history. The indemnity for June would be 47,500 divided by 12 = 3,958 cwt.  That production is then multiplied by the difference of the coverage and the margin of $0.70 to create a $2,770.60 (3,958 x $0.70) payment for the month of June.

Can I pay the 5-Year lock-in premium upfront and not worry about it for the next 5 years? 

    1. No, the producer must come in to the local Farm Service Agency Office annually and pay their premium and administrative fee.  

What happens if I fail to pay my administrative fees or premiums on time? 

    1. Administrative fees are due at the time of enrollment, or by the end of the coverage election period (2019= September 20, 2019) Failure to do so will result in loss of coverage for the year.

Production History Establishment

What is eligible production history?

    1. Eligible production history is that recorded by the local Farm Service Agency Office and sent to the producers via mail. For existing diary operations (those before January 1, 2014) this is the highest annual milk production for 2011, 2012, and 2013. For new dairy operations (those after January 1, 2014) please see questions below.

What date is considered the start of milk marketing? the day the operation started milking or the day the milk was shipped?

    1. The date of Milk Marketing is the date the milk was shipped based on verifiable documentation.

What is my Production History if my dairy operation had marketed milk before January 1, 2014?

It is the highest milk production of the following years: 2011, 2012, and 2013.

What is my production history if my dairy operation had marketed milk a year or more, but was not in opeartion prior to January 1, 2014? 

    1. Any milk marketing production value during one full calendar year.

What is my production history if my dairy operation has been milking for less than a full calendar year? 

    1. There are 2 Options an extrapolation method to get to a full year based on the month of actual milk production or an adjustment in accordance with the national rolling herd average

Are their still "bumps" under the Dairy margin Coverage Program similar to MPP-Dairy? 

    1. No- the last bumped production history under the MPP-Dairy program will be the only bump used for DMC.

 Dairy Margin Coverage Election

What date am i required to enroll my dairy in the dairy margin coverage program if I want to participate? 

    1. In 2019, producers have until September 20, 2019 to enroll in DMC. The date for 2020 has not been determined, but for coverage years 2021, 2022, and 2023 enrolment will be due on September 1 of the previous year.

What is Tier 1 and Tier 2? 

    1. Tier 1 is the quantity of a producers milk production below 5 million pounds. Tier 2 is the quantity of a producers milk production above 5 million pounds. A producer with only 4 million pounds of milk would only have Tier 1 production and a producer with 7 million pounds of milk would have 5 million pounds of milk in Tier 1 and 2 million pounds of milk in Tier 2.

Can i select different coverage levels for Tier 1 and tier 2 production? 

    1. Only if the producer selects a coverage level above $8.00 for Tier 1 can they pick a coverage level that is not the same in Tier 2. A producer that picks a coverage level of $8.00 or below for a coverage level in Tier 1 will have to pick that same coverage level for their Tier 2 production.

Is there a discount for multi-year sign-up? 

    1. Yes, producers will have a 1-time opportunity in the first year of enrollment only to sign-up for a multi-year period through 2023 and receive a 25% discount on their premium. This is only available in the first year of election by the producer.