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1 1 (January 26, 2024)

handle is hein.crs/goveodi0001 and id is 1 raw text is: Congressional Research Service Informing the Iegislative debaIe since 1914 Farm Bill Primer: Support for the Dairy Industry The Dairy Margin Coverage (DMC) program was enacted in the 2018 farm bill (P.L. 115-334) to support dairy operations. The DMC program replaced the 2014 farm bill's Margin Protection Program (MPP; P.L. 113-79, as amended by P.L. 115-123, the Bipartisan Budget Act of 2018). Prior to 2014, the U.S. Department of Agriculture (USDA) purchased dairy products to support milk prices at certain levels. Many stakeholders believed the support program failed to account for rising feed costs. In 2014, Congress created a margin program to allow milk producers to select a guaranteed margin on milk production. The margin is the difference between the USDA national all milk price and a calculated feed cost, providing producers optional risk protection on price and feed costs. DMC was to expire on December 31, 2023, but Section 102 of the Further Continuing Appropriations and Other Extensions Act, 2024 (P.L. 118-22, Division B), extended it until December 31, 2024. The extension includes supplemental DMC that was authorized in the 2021 appropriations act (see DMC Adjustments). DMC Basics DMC allows milk producers to buy a guaranteed margin for their milk production. For example, if the margin-all milk price minus feed cost-amounted to $9.00 per hundredweight (100 pounds; cwt) of milk for a month, producers who selected $9.50 margin coverage would receive a $0.50 per cwt DMC payment on covered production. Under DMC, producers may select margin coverage from $4.00 per cwt up to $9.50 per cwt for annual milk production of 5 million pounds or less (Tier I). For milk production over 5 million pounds (Tier II), the margin coverage tops out at $8.00 per cwt. The $4.00 margin, or catastrophic coverage, is free for all dairy producers. For margin coverage above $4.00, producers pay increasing premium rates as specified in statute (Table 1). A participating dairy producer must have an established milk production history with USDA's Farm Service Agency (FSA) and pay an annual administrative fee of $100. The fee is waived for beginning, limited resource, socially disadvantaged, or veteran producers. Each year, dairy producers participating in DMC choose a margin coverage level and the share of their milk production history to cover-from 5% to 95%-and receive DMC payments for months in which the margin is triggered. The total premium amount that producers pay for margin coverage above $4.00 per cwt is a product of the margin level premium that is set in statute and the share of production history the producer selects. Initially, producers had the option to purchase either Tier I or II margin coverage for the full five years of DMC, instead of an Updated January 26, 2024 annual selection. In return, milk producers received a 25% discount on premium costs. FSA calculates and reports the DMC milk-feed margin each month (Figure 1). If margin payments were triggered, producers are paid for a twelfth of covered annual milk production history. Payments under DMC are subject to sequestration reductions of 5.7% in 2021-2024. Table 1. DMC Premium Rates, $ per cwt Margin Tier l 5 Tier ll > 5 million lbs. million lbs. $4.00 $0 $0 $4.50 $0.0025 $0.0025 $5.00 $0.005 $0.005 $5.50 $0.030 $0.100 $6.00 $0.050 $0.310 $6.50 $0.070 $0.650 $7.00 $0.080 $1.107 $7.50 $0.090 $1.41 3 $8.00 $0.100 $1.813 $8.50 $0.105 NA $9.00 $0.1 10 NA $9.50 $0.150 NA Source: Agricultural Improvement Act of 2018 (P.L. 115-334). To date (January 2019-November 2023), there have been 59 months of margin calculations, and producers who opted for a $9.50 margin have received payments in 35 months. Producers selecting margin coverage under $9.50 have received payments in some of those months, particularly in 2021 and 2023. Payments on the $4.00 catastrophic margin triggered in June and July 2023 for the first time under DMC. The annual average monthly margin was $9.61 in 2019, $9.45 in 2020, $6.92 in 2021, $10.72 in 2022, and $6.54 through November 2023.

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