Dairy farmers can now sign up for USDA’s Dairy Margin Coverage program to insure a margin between milk prices and the cost of feed.

Enrollment closes April 29.

Enrollment was delayed due to adjustments to the program required when Congress extended the 2018 Farm Bill, which expired Sept. 30. That revision will allow eligible dairy operations to make a one-time adjustment to their established production history.

Coverage will be retroactive to Jan. 1, and payments could begin as soon as March 4, according to USDA Farm Service Agency.

DMC is a voluntary risk management program that pays dairy farmers when the difference between USDA’s “all milk” price and a calculated feed cost falls below a certain dollar amount chosen by the farmer.

Indemnity payments

Coverage is available for a margin of $4 a hundredweight to $9.50 a cwt. for up to 95% of a producer’s annual production up to 5 million pounds. Producers with more than 5 million pounds of production can insure a margin from $4 a cwt. to $8 a cwt. Coverage at the $4 level is free with a $100 administration fee.

DMC payments triggered in 11 months during 2023, including June and July when margins fell below the $4 cwt. catastrophic level. Those indemnity payments are estimated at nearly $1.3 billion.

More than 17,000 operations enrolled last year, which was 75% of dairy farms with an established production history to participate in USDA programs.

FSA is forecasting a margin of $8.46 in January and $9.35 in February, with margins above $10 a cwt. the rest of the year and an annual average of $11.42. The average annual margin in 2023 was $6.71.

Risk management

“If 2023 taught us anything, it’s that we honestly have no idea what will happen in the market in any given year,” Zach Ducheneaux, FSA administrator, said in a press release.

“Producers who took advantage of this affordable risk management tool for the 2023 program year were able to mitigate some financial impacts on their operations,” he said.

Indemnity payments in 2023 totaled $33.4 million in Idaho, $26.4 million in Washington, $13.4 million in Oregon and $143 million in California.