With the Dairy Margin Coverage (DMC) program likely extended and the next farm bill pushed into 2024, the financial importance of the safety net on U.S. dairy producers continues to mount, although the impact lessened in September.
An improving U.S. dairy producer milk-feed income margin reduced DMC insurance program indemnity payment on September milk marketings. The September DMC milk income over feed cost margin rose to $8.44 per hundredweight (cwt), limiting indemnity payments to dairy operations enrolled in DMC at Tier I insured levels of $8.50 and above. (Read: September DMC margin hits $8.44 per cwt) As a result, September DMC payments totaled about $35 million, the smallest monthly total for 2023.
Through Nov. 8, DMC indemnity payments disbursed through the USDA’s Farm Service Agency (FSA) for the first nine months of 2023 had hit $1.27 billion. January-September DMC payments averaged $74,553 per dairy operation enrolled in 2023.
Based on early November enrollment data, 17,041 dairy operations are enrolled in the 2023 DMC program, representing about 74% of operations with established production history. Annual milk volume covered under the program totals 155.4 billion pounds, about 77% of production history established in 2023.
Through early November, Wisconsin led all states in total DMC indemnity payments at $272.2 million, averaging $63,633 per enrolled operation. That’s followed by (total payments and average payment per dairy operation): California – $140 million and $148,739, New York – $117.1 million and $64,709, Minnesota – $102.4 million and $59,796 and Pennsylvania – $99.4 million and $56,110.
The updated report does not include enrollment in the Supplemental DMC program. All payments are subject to a 5.7% sequestration deduction.
Historical payment totals
With three months remaining in 2023, total DMC payments have surpassed the previous annual high of $1.187 billion distributed in 2021. Indemnity payments and average payments per dairy operation in the previous four years were:
- 2022 – $83.7 million, averaging $4,656 – indemnity payments were triggered in just two months (August and September).
- 2021 – $1.187 billion, averaging $62,214 – indemnity payments were triggered in 11 of 12 months.
- 2020 – $234 million, averaging $17,324 – indemnity payments were triggered in five months.
- 2019 – $451.6 million, averaging $19,306 – indemnity payments were triggered in seven months.
Margin outlook improving
The October DMC margin and indemnity payments will be announced on Nov. 30. Based on milk and feed futures prices at the close of trading on Nov. 10, the DMC decision tool forecasts an October margin of about $9.54 per cwt, above the maximum Tier I DMC coverage level of $9.50 per cwt. Projected margins for the remainder of 2023 are: November – $9.42 and December – $9.06. If realized, 2023 indemnity payments for producers insured at the Tier I/$9.50 per cwt level would be triggered in 11 of 12 months.
