2019 Farm Bill: Dairy FAQ

What is DMC?

  • DMC stands for Dairy Margin Coverage. DMC evolved from previous dairy income support programs. DMC is a direct descendant of MPP-Dairy. Over its evolution, dairy policy has moved from certainty, set minimum price, to income risk that is insured by DMC.

Is DMC permanent?

  • No, DMC is part of the commodities title of the 2019 Farm Bill that has temporary authority. The Agricultural Act of 1949 is the permanent farm legislation that could take effect if no temporary farm legislation is passed.

How is an indemnity payment calculated in DMC?

  • DMC pays when the margin coverage chose is greater than the calculated monthly margin, US All milk price minus US feed cost.

When can I sign up?

  • Signup started 17 June 2019 and last till 20 Sept 2019.

How much milk can I cover with DMC?

  • You can cover up to your actual production history but with two tiers of coverage. Up to 5 million pounds, Tier I, has a separate lower premium structure than Tier II. Tier II can be covered with a higher premium structure. Premium amounts are based on the chosen coverage level threshold (CLT). CLT is the margin chosen that a dairy wants to insure.

Can a dairy update its actual production history?

  • No and there will be no annual bump, or production increase. Dairy operations new since 2013 will follow a FSA procedure to establish a production history.

What is a new dairy operation?

  • Moving a diary to a new county, state, new ownership arrangement, or new partners to an existing dairy operation is not a new dairy.

I was in MPP-Dairy. How do I get my premiums back?

  • You can either receive 50% of the MPP-Dairy premium in cash or as a 75% credit toward DMC premiums.

I produce well over 5 million pounds of milk. How does Tier I and Tier II work?

  • As an example, if you production history is 11 million pounds, the first 5 million pounds is eligible for Tier I coverage. The next 6 million pounds is eligible for Tier II coverage. You can select different coverage levels for Tier I and Tier II milk, but if Tier I coverage is selected below $8; the same coverage level must be selected for Tier II milk. If a dairy chooses $8.50 Tier I coverage, the dairy must choose a lower coverage in Tier II.

Have coverage percentages changed?

  • Yes, a dairy can now cover from 5% to 95% of milk production. Previously the coverage choices were from 20% to 90%.

Have premiums for DMC changed compared to MPP-Dairy?

  • Yes Tier I premiums are lower than the premiums in MPP-Dairy either 2016-17 or the lower 2018 premiums.

When will premiums be due for DMC?

  • For 2019, premiums will be due 20 September 2019. The date has not been set. Premiums will be due 1 September for the 2012-2023 coverage years.

Is there a premium discount?

  • Yes, if you sign up for all 5 years of DMC coverage by 20 September 2019. The discount is 25%. There is no discount is a dairy signs up year by year.

Has the MPP-Dairy tool been updated for DMC?

  • Yes, new premiums have been added along with the current margin projections and the coverage percentages. The DMC Decision Tool calculates Tier I and Tier II expected payments and probability of that payment has been based on current milk prices from futures options trades.