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December 10, 2021 MPC Friday Report

Updated: Feb 1, 2022


Next Week: Sign Up for 2022 Dairy Margin Coverage Program

By Geoff Vanden Heuvel, Director of Regulatory and Economic Affairs

USDA announced some improvements in the Dairy Margin Coverage (DMC) program, which is the dairy safety net program that provides excellent risk management coverage on the first five million pounds of each dairy’s annual production. The biggest improvement is to the alfalfa hay component of the feed cost calculation, which will now be 100% based on the price for premium alfalfa as opposed to using a 50/50 blend of prices of average quality hay.

Calculations published by Dave Natzke in Progressive Dairy estimate that this change in the hay calculation would have increased the hay cost factor in the DMC feed calculation by $14.50 per ton in 2020 and $15.60 per ton in the first 10 months of 2021. USDA is going to issue supplemental payments for 2020 and 2021 to those enrolled in the DMC. If you signed up for the $9.50 margin coverage for the full 5 million pounds eligible, this supplemental payment could be in the $12,000-plus range.

This demonstrates once again that the DMC program is the gift that keeps on giving. While it can be irritating that it is only available on the first five million pounds you produce, you definitely do not want to miss these benefits by failing to sign up. DMC signups for 2022 start on Monday, December 13 and run through February 18, 2022 at your local USDA-FSA office.


East Kaweah GSA Update

By Geoff Vanden Heuvel, Director of Regulatory and Economic Affairs

The board of East Kaweah GSA meet last Friday and adopted an emergency allocation resolution. Here is what they adopted:

  • Each assessed acre in the GSA will be allocated 1.65 acre feet of groundwater consumption tracked by Evapotranspiration with no charge.

  • Allocations can be transferred anywhere in the GSA for this year only.

  • Extraction above the 1.65 acre feet will be penalized $500 per acre foot.

  • The start date for calculating consumption is retroactive to October 1, 2021

A couple of factors to consider:

  • There are about 95,000 assessed acres in EKGSA, but when you take out driveways, shops and equipment yards there are about 85,000 irrigated acres.

  • About 75% of the EKGSA does have some access to surface water. Some of these districts have stored water underground that they can recover this year.

  • The EKGSA board was warned by their attorney that establishing this allocation with penalty fees retroactively could run into legal trouble.

The bottom line is EKGSA is located near the foothills of the Sierras in Tulare County where the groundwater aquifer is quite shallow. There has been significant groundwater extraction in their area because of the drought in the last two years. The board clearly believes it must take this action to protect its part of the Kaweah Subbasin. This a game changer for farmers in this area.


Milk, Dairy and Grain Market Commentary

By Sarina Sharp, Daily Dairy Report

Someone left the gate open on LaSalle Street, and the bulls ran unchecked in the dairy pits. Their bellows echoed around Chicago at news of slowing milk production and waning dairy product inventories.

Meanwhile, from the darkest corners of the Board of Trade building, the bears whispered their concerns about the health of the global economy and accelerating inflation. One bear told another, “Consumers are feeling the pinch of high prices. Will they buy less dairy?” The second added, “And have you seen the size of the Chinese milk powder stockpile?

They’ll surely import less next year!” But their warnings were drowned out by the stamping of hooves as the markets shot enthusiastically upward.

Read the entire MPC Friday Report below

2021-12-10 MPC Newsletter
Download PDF • 512KB

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