The margin over feed costs calculated by USDA for the Dairy Margin Coverage (DMC) program fell to a record low in June. That value of $3.65 was $1.18 less than the previous record that had just been set the month before.
The feed prices used for the calculation — including corn, premium alfalfa hay, and soybean meal —were lower than the May prices but remain high compared to historical values. The big driver, though, was the All-Milk price. The year started off at $23.10 per hundredweight (cwt.) but tumbled to $17.90 per cwt. in the June calculation. With final feed costs determined to be $14.25 per cwt., that left the milk margin above feed costs at just $3.65.
Prices used in the monthly 2023 DMC calculations
Premium alfalfa hay ($/ton)
Soybean meal ($/ton)
Final feed costs for DMC ($/cwt.)
Milk margin above feed costs for DMC ($/cwt.)
This is the first time the margin for DMC has fallen below the $4 level. When farms sign up for DMC, they select a level of coverage between $4 and $9.50 per cwt. Producers can cover up to 5 million pounds of milk under the Tier 1 premium pricing. If they do not elect to pay a premium, free catastrophic coverage at the $4 level is available, only requiring an administrative fee to enroll.
One year certainly makes a difference when it comes to producer margins. Last year, DMC payments totaled $83.7 million for all of 2022. In the first six months of 2023, payments have already surpassed $611.9 million. This year, nearly three-fourths of dairies in the United States with production history are enrolled at some level of DMC coverage.