Escalating feed costs ate into milk income margins in February but not enough to trigger indemnity payments under the Dairy Margin Coverage (DMC) program.
Natzke dave
Dave Natzke
Editor / Progressive Dairy

The USDA released its latest Ag Prices report on March 31, including factors used to calculate February DMC margins and potential payments. The February DMC margin is $10.98 per hundredweight (cwt), above the top Tier I insurable level of $9.50 per cwt (Table 1). The February 2022 DMC margin is 56 cents less than January‘s margin, which hit a 14-month high of $11.54 per cwt.

DMC indemnity payments

Milk price highest since October 2014

The February 2022 announced U.S. average milk price rose 50 cents from January to $24.70 per cwt. It’s the highest monthly average price since October 2014.

February milk prices were higher than the month before in 23 of 24 major dairy states (Table 2). The lone exception was Texas, where the monthly average price was down 40 cents from January at $25.20 per cwt.

milk prices received

Largest month-to-month increases were in heavy Class I utilization states in the Southeast: Florida (up $1.40), Georgia (up $1.30) and Virginia (up $1.10).

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Producers in 10 states saw average prices at $25 per cwt or higher, with a top of $27.50 per cwt in Florida. As in January, New Mexico again remained the only state where the February average price was less than $23 per cwt.

Compared to a year earlier, February 2022’s U.S. average milk price was up $7.60 per cwt. Year-over-year prices were up $9 per cwt or more in Arizona, Kansas, Texas and Washington, and $8-$9 higher in Georgia, Idaho, Illinois, New Mexico, New York, Pennsylvania and Vermont.

All feed prices jump

Offsetting the gain in the average milk price were higher average costs for alfalfa hay, corn and soybean meal (Table 3).

DMC margin calculations

  • The average price for corn rose 53 cents from January to $6.10 per bushel, the highest since August 2021.

  • The average cost of soybean meal hit a 78-month high at $480.96 per ton.
  • With the DMC change to include the price of dairy-quality alfalfa hay in feed cost calculations, February’s average price was $266 per ton, up $8 from January and the highest on record.

February feedstuff prices yielded an average DMC total feed cost of $13.72 per cwt of milk sold, up $1.09 from January and the highest since the inception of the DMC program or its predecessor, the Margin Protection Program for Dairy (MPP-Dairy) dating back to March 2014.

Comparing 2014, 2022

Comparing milk prices and feed costs to 2014 – the last time milk prices were this high – provides a substantial contrast in milk income margins.

While the February 2022 milk income over feed cost margin was $10.98 per cwt, the September-October 2014 average all-milk price under the MPP-Dairy program was slightly higher at $25.30 per cwt but yielded a much larger margin at $15.51 per cwt. Average feed costs in September-October 2014 averaged $9.79 per cwt, with the hay price averaging $195.50 per ton, corn averaging $3.52 per bushel and soybean meal averaging $453.61 per ton.  end mark