Dairy Margin Coverage Comes Just in Time

Rich Appel, Appel Dairy; appeldairy@gmail.com; photos by Jayson Korthuis; jysnkrth@me.com
  • May 28, 2020

As consumers continue to enjoy delicious products during quarantine, many are asking how our farmers are doing. They want to make sure we are protecting our local and national food supply. One program put in place before the pandemic is proving to be very valuable to many dairy farmers here in Washington state.

In July 2019, farmers across the country were given an opportunity to apply for the Dairy Margin Coverage (DMC) program. Through the years, this program has offered protection for dairy farmers, offering a margin whenever the difference between the milk price and the feed price falls below a certain dollar amount. 

In other words, the DMC basically offers insurance for farmers to support them when catastrophes occur. Based on the projection of the milk price, a farmer can join this program and select coverage based on price per hundred weight. The Farm Service Agency (FSA), which helped develop the program summarizes it this way: “Producers have the choice to lock in coverage levels until 2023 and receive a 25 percent discount on their DMC premiums.”

It sounds like a pretty good deal: guaranteed coverage even when the milk price goes down the drain. But here in Whatcom County, how does it affect dairy farmers?

In December 2019, program enrollment closed. Like many dairy farmers in Whatcom County, one dairy farmer (who preferred to remain anonymous), was uncertain about signing up for the program for the coming year. The milk price projections looked good. For the first time in a long time, the milk price looked like it would be going up in 2020.

However, despite the projections, this farmer decided to purchase the insurance. And, like other farmers who took that chance, he is now glad he did.

“Normally I’m not an insurance person, but this sounded like a pretty good deal,” he said. Then, risk turned to relief for enrolled farmers when the coverage came through. In fact, some are saying it came through just in time.

“As coronavirus became more of an issue and the milk price projections fell, farmers realized that this coverage program wasn’t such a bad idea after all,” said the Whatcom county farmer. By February, unenrolled farmers were asking for the DMC program to reopen. 

The coronavirus has indeed brought troubles for many dairy farmers across the nation. Though it’s not happening in Washington State, milk has been dumped down the drain. Developed by the University of Wisconsin in collaboration with FSA, the DMC program has fortunately been able to help some of the many farmers facing this struggle.

Sonny Perdue, U.S. Secretary of agriculture heard the pleas to re-open DMC after the Covid-19 crisis escalated , but decided not to do so, stating “you can’t buy fire insurance after your house burns down.”

In March, for the farmers who did purchase coverage, the program triggered for the first time. Now, according to the Washington Ag Network, payments are likely to trigger for the next couple months of 2020, based on milk price projections.

All in all, this program has been a mostly positive opportunity for farmers. Even though only 50% of farmers nationally signed up (compared to nearly 85% in the year prior), many are taking advantage of the benefits.

Now, in response to the pandemic, farmers also have the opportunity to take advantage of the Coronavirus Food Assistance Program (CFAP), which will be available to all farmers. For the few farmers who took the risk on DMC, this is an additional benefit. 

“I’m glad I took the risk,” says the unnamed farmer when asked if he thought it was a positive move. “I’m grateful for an opportunity to keep farming and glad to have this additional security during times like these.”

To learn more about the DMC program and milk price projections, click here: https://bit.ly/3ec0pKm

Learn more about how the DMC program works and how to enroll for 2021 here: https://bit.ly/3eBWIxR

Learn more about the CFAP program and how to enroll here: https://www.farmers.gov/cfap