Why should you be using the Dairy Margin Protection Program?
What is the Dairy Margin Coverage? How is it different from MPP? Is it worth it?
Something had to change in government programs of the past. That change is Dairy Margin Coverage (DMC), the revamped version of the Margin Protection Program (MPP), which didn’t succeed in helping producers.DMC aims to make payments to enrolled farms when national average cost margins fall below a coverage level selected by the producer, but with a positive outcome for producers due to the changes made to the program.
With the DMC program, producers can now choose coverage levels from $4-$9.50 (in $.50 increments) with the Tier 1 coverage, which is the first 5 million pounds coverage and the most commonly used, instead of only being able to go to $8 with the old program. Additionally, the premium rates for the Tier 1 coverage are substantially lower than previous levels with MPP, which should help make the program worth it for producers. Farms can now cover up to 95% of their historical milk production history with a maximum of 5 million pounds with DMC for the first tier. Tier 2 coverage is for anything over 5 million pounds covered with DMC and has more expensive rates applied for margin coverage levels than Tier 1, or the first 5 million pounds. It’s also completely compatible with Dairy Revenue Protection (DRP) and Livestock Gross Margin for Dairy Cattle (LGM). This compatibility extends to Ag Hedge Desk’s other programs like Revenue Over Feed and the Horizon Pricing Program, which allows farms to diversify risk management.
On the plus side of MPP failing and due to the large amount of negative outcomes form DMC’s predecessor, the 2018 Farm Bill allowed producers who were covered under MPP-Dairy to be eligible for reimbursement on payments. Producers who qualify can receive either 50% of their reimbursement as cash or 75% as credit toward DMC premiums. This offer is only available through September 20th, 2019, however, so make sure you know if your farm qualifies before then.
Overall, the Dairy Margin Coverage program provides catastrophic coverage as well as margin protection at the low cost of $100 annually for an administrative fee, plus their choice of premium, which should now be much more affordable. The coverage should more than pay for itself over the course of the year, while also being compatible with other programs to cover any production over 5 million pounds and diversify a risk portfolio. As we always say, the worst possible thing a dairy can do is nothing, so enrolling in DMC is definitely a step in the right direction of a dairy’s risk management. If you have questions or would like advice regarding what programs to enroll in, feel free to contact us more information!