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 $3.65.
Prices used in the monthly 2023 DMC calculations | ||||||
Month | Corn ($/bu) | Premium alfalfa hay ($/ton) | Soybean meal ($/ton) | All-Milk ($/cwt.) | Final feed costs for DMC ($/cwt.) | Milk margin above feed costs for DMC ($/cwt.) |
January | 6.64 | 328.00 | 482.40 | 23.10 | 15.16 | 7.94 |
February | 6.80 | 324.00 | 500.53 | 21.60 | 15.41 | 6.19 |
March | 6.67 | 314.00 | 484.40 | 21.10 | 15.02 | 6.08 |
April | 6.70 | 315.00 | 457.25 | 20.70 | 14.86 | 5.84 |
May | 6.54 | 317.00 | 423.58 | 19.30 | 14.47 | 4.83 |
June July | 6.49 6.22 | 310.00 288.00 | 413.46 443.15 | 17.90 17.40 | 14.25 13.88 | 3.65 3.52 |
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.
