The margin is calculated by USDA. It is defined as the U.S. all-milk price, minus national average feed costs, computed by a formula using the prices of corn, soybean meal, and alfalfa hay. The formula reflects the cost of feeding all the dairy animals on a farm, including heifers and dry cows. The program pays on one-sixth of a producer’s annual production history, multiplied by the percentage of coverage selected by the producer.
The program pays when the national average margin for any one of six consecutive two-month periods is below the level of coverage selected by the producer. The two-month periods are January-February, March-April, May-June, July-August, September-October, and November-December. It is likely producers will receive payments a little more than a month after a payment is triggered. For example, if a payment is triggered for January-February, the margin for that period will be announced at the end of March and payments will be sent out in early April. Payments of $0.0045 for January-February and $0.495 for March-April have been made so far in 2015.