In your December issue . . .
CLASS III AND IV FUTURES RAN NECK AND NECK at the close of CME trading on December 8. Both had an average of $19.97 per hundredweight (cwt.) for the first six months of the new year. On November 1, those same contracts averaged $19.38 and $19.57, respectively.
JANUARY 31, 2023, IS THE NEW DEADLINE to sign up for Dairy Margin Coverage (DMC). “We recognize this is a busy time of year with many competing priorities, so we’ve extended the DMC enrollment deadline to ensure every producer who wants coverage in 2023 has the opportunity to enroll in the program,” said FSA administrator Zach Ducheneaux.
“EARLY PROJECTIONS INDICATE DMC PAYMENTS are likely to trigger for the first eight months of 2023,” continued Ducheneaux. “We all know that markets fluctuate, sometimes at a moment’s notice and sometimes with no warning at all, so now’s the time to ensure your operation is covered. Please don’t let this second chance slide,” he advised.
NEARLY 18,000 DAIRY OPERATIONS that enrolled in DMC for 2022 received margin payments in August and September for a total of $76.3 million. At 15 cents per hundredweight for $9.50 coverage, risk coverage through DMC is a relatively inexpensive investment. Overall, 20% of the nation’s milk production was covered by DMC last year.
THE RECORD BUTTERFAT PRICE RUN is done. At $3.37 per pound, the five-month span that saw the federal order butterfat price set new monthly records from June to October ended in the November 2022 milk check. However, the November figure was higher than both June and July.
CHEESE AND BUTTER ABSORBED THE MOST DAIRY FAT. In 2021, cheese accounted for 42.1% of all fat use; butter, 18.3%; frozen dairy products, 7%; and sour cream, 3.2%. Another 15.6% falls into a category called residual as end-use product data is hard to find. In 2021, cheese challenged the 2018 record that used 42.8% of the dairy fat supply.
ONE CATEGORY THAT CLEARLY LOST market share is fluid milk. In 2021, beverage milk accounted for 10.6% compared to 18% in 2000.
AT $18.65 PER HUNDREDWEIGHT, the current third-quarter-out Dairy Revenue Protection (DRP) contract offers a net revenue floor nearly $2.75 per cwt. higher for Class III milk in Wisconsin when compared to the 2010 to 2021 average of $15.92 per cwt. See chart below.
“PRODUCERS HAVE AN OPPORTUNITY to lock in revenue floors at higher levels compared to the last 10 years,” explained economist Marin Bozic. “However, feed costs in many instances have climbed, making floors in the $18 range not as attractive.” Turn to page 678 to learn more. The DRP adoption rate has grown to 30% to 35% of U.S. milk production.