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December Brings More Dairy Risk Management Deadlines

December Brings More Dairy Risk Management Deadlines
By Andrew Sandeen
 
December 13th is the final day to sign up for 2020 Dairy Margin Coverage.
 
Even though it seems like the 2019 deadline for Dairy Margin Coverage (DMC) sign-ups just passed, the next deadline is looming. December 13th is the final day to sign up for 2020 coverage, barring an extension of the deadline. Here are a few ways to look at the options.
 
For discount lovers
 
You may have already committed to the full five years of the program, capitalizing on the 25% discount that was offered. If this is the case, you don’t have any decisions to make in terms of coverage, at least until 2024. However, you will need to fill out paperwork and pay the $100 administrative fee for 2020 by the December 13th deadline.
 
For the cautious who want peace of mind
 
Signing up for 2019 was an easy decision for many. Projected dairy and feed prices for 2020 look more favorable for dairy profitability, but no one can promise that will stay true, and having some sort of risk management plan in place is important. Therefore, taking the maximum $9.50 margin coverage for 2020 will provide protection against the possibility of low milk prices and/or high prices on corn, soybean meal, or alfalfa hay.
 
For the cautious who watch every dollar spent
 
Current projections suggest there will be very little if any, payback from Dairy Margin Coverage in 2020. Milk and feed prices project to be fairly consistent from beginning to the end of the year, and the margin is projected to bottom out at $10.38 (as of 11/26/19) in June, well above the $9.50 threshold where payments kick in.
 
Below is a snapshot of what the Dairy Margin Coverage Decision Tool showed for market projections on November 26th. You can visit the tool any time to get a more current picture and evaluate the projections before heading to the Farm Service Agency office. If you aren’t already obligated for the full five years and decide to opt-out for 2020 coverage, no action is required.
 
 
A good question to ask might be what other risk management options are available for 2020. Maybe now is a good time to explore the still somewhat new Dairy Revenue Protection program. It has a very different makeup than Dairy Margin Coverage, protecting against unexpected drops in dairy prices (Class III, Class IV, butterfat, protein) on a quarterly basis. For more information, go to RMAs Dairy Revenue Protection factsheet or connect with a trusted insurance agent who is offering the coverage.
 
Source : psu.edu