Fewer dairy farmers chose to opt into the Dairy Margin Coverage Program that was authorized in the 2018 Farm Bill. At the beginning of this year, the forecast was for an improving dairy economy and the USDA prediction tool that showed either low or no DMC payments this year.
However, the rapidly-evolving situation brought on by the COVID-19 outbreak is a reminder about how important safety net programs can be in agriculture. DMC is a voluntary, insurance-style program that makes payments when the national average income-over-feed-cost margin falls below a coverage level selected by each farmer. Coverage is available from $4 a hundredweight to as much as $9.50 per hundredweight. At the time of the 2020 program year signup, the all-milk price was expected to remain well above the levels of the previous four years. Projections had the price as high as $19 a hundredweight during 2020. Like other industries, dairy has been hit by the pandemic. Class 3 and Class 4 milk futures have sharply declined. One bright spot is fluid milk sales. Those numbers have jumped higher as Americans shift food dollars away from restaurants and more into at-home spending on food.