Tariffs Could Impact Dairy Margin Coverage

By Tom Crosby

Today, there is a lot of uncertainty in markets and the long-term effects of on-again, off-again tariffs and resulting trade disputes. I wouldn’t be surprised to see some unpleasant surprises for National Farmers members as things play out.

I’m especially worried about Dairy Margin Coverage, or DMC payments. Let me explain my concern. DMC payments are based on the margin between the average milk price farmers receive nationwide and an index of feed prices.

When that difference is lower, farmers are assumed to be less profitable, and payments are higher. When that difference is higher, however, farmers are assumed to be more profitable, and payments are lower.

Tariffs could reduce the feed prices that are used to calculate program payments. That makes the margin higher, so program payments will be lower. Our member producers who grow most of their feed get a double whammy when this happens.

On the one hand, they receive lower payments from the DMC program. On the other, they do not benefit directly from lower feed prices the way that farms that buy most of their feed do.

Let me be clear, National Farmers has never endorsed low grain prices to solve problems among livestock producers. We have always, and always will, fight for farm prices across the board that cover production costs plus a reasonable profit. Unfortunately, government programs don’t always lead us in that direction, and we must make the best of what comes our way from Washington.

Our farmers have enough problems without adding more with the effects of trade disputes. Rest assured that we are keeping a sharp eye out for ways new economic policies might backfire for family farmers. When we see those problem areas, we will do all we can to make sure our friends in Congress know what they can do to set things right.