The USDA released its latest Ag Prices report on Jan. 31, including factors used to calculate DMC margins and payments. The December DMC margin was estimated at $11.95 per hundredweight (cwt), down 26 cents per cwt from November but well above the highest insurable margin of $9.50 per cwt (Table 1). There were no DMC program indemnity payments at any level of coverage for a fifth straight month.
December milk price dips
The December 2019 U.S. average milk price dipped 30 cents per cwt from November to $20.70 per cwt. The average was $4.10 higher than December 2018 (Table 2) and is the second-highest monthly price since December 2014. The 2019 U.S. average all-milk price was $18.60 per cwt, $2.39 more than 2018.
Among major dairy states, dairy farmers in nine states saw milk prices increase slightly from November, led by a 70-cent increase in Florida. Dairy farmers in 14 states saw lower prices than the month before, with largest declines ($1.10-$1.40 per cwt) primarily in states with high Class III utilization due to weakening cheese prices.
There were some dramatic price increases compared to a year earlier, with December 2019 prices up $5 per cwt or more in Iowa, Minnesota, South Dakota, Utah and Wisconsin.
Producers in Florida ($23.80) and Oregon ($23.60) had the nation’s high prices in December. Monthly lows, all under $20 per cwt, were in Arizona, California, Kansas, Michigan and New Mexico.
Feed costs inch lower
U.S. average soybean meal and alfalfa hay prices were down somewhat in December, offsetting a small increase in the average corn price to help control average total feed costs.
The December average alfalfa hay price used in the DMC calculations was $187.50 per ton, down $3.50 from November and the low for the year. Soybean meal averaged 299.89 per ton in December, down about $3.50 per ton from November; corn prices averaged $3.71 per bushel, up 3 cents.
That yielded an average DMC total feed cost of $8.75 per cwt of milk sold, down 4 cents from November (Table 3).
The USDA’s DMC Decision Tool estimates margin ranges and payment probabilities based on current milk and feed futures prices. As Jan. 31, DMC margins were expected to move lower in January 2020 but remain between $10.25-$10.50 per cwt through July before strengthening in the latter half of the year.
DMC margins had a 23%-35% probability of falling below the top insurable level of $9.50 per cwt between April-October 2020. 
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Dave Natzke
- Editor
- Progressive Dairy
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