Update highlights

Natzke dave
Dave Natzke
Editor / Progressive Dairy

February 2023 DMC payments top $122 million

Dairy Margin Coverage (DMC) program indemnity payments on February 2023 milk marketings enrolled in the program will top $122 million, according to the latest update from the USDA’s Farm Service Agency (FSA). Indemnity payments for the first two months of 2023 will be more than $179.3 million.

The February DMC margin was $6.19 per hundredweight (cwt), triggering Tier I indemnity payments at $6.50-$9.50 coverage levels and Tier II indemnity payments at $6.50-$8 DMC coverage levels. The January DMC margin was $7.94 cwt, triggering indemnity payments totaling $57 million.

Read: Shrinking DMC margin triggers large February indemnity payments

Wisconsin led all states in January-February DMC indemnity payments at $40.07 million. That was followed by: California – $17.61 million, New York – $17.06 million, Minnesota – $15.36 million and Pennsylvania – $14.68 million.

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January-February DMC payments averaged $10,659 per dairy operation enrolled in 2023. All payments are subject to a 5.7% sequestration deduction.

Based on latest enrollment data as of April 3, 16,824 dairy operations are enrolled in the 2023 DMC program, representing about 72.6% of operations with established production history. Annual milk volume covered under the program totals 156.6 billion pounds, about 78% of production history established in 2023. The report does not include enrollment in the Supplemental DMC program.

The March DMC margin and potential indemnity payments will be announced on April 28.

March FMMO class prices mostly lower

March 2023 Federal Milk Marketing Order (FMMO) pooling estimates, uniform prices and producer price differentials are scheduled to be released next week. Three of four milk class prices declined from February.

Class prices announced on April 5 were:

  • At $19.52 per cwt, the March Class II milk price is down $1.31 from February and $5.24 less than March 2022.
  • At $18.10 per cwt, the Class III milk price rose 32 cents from February but is $4.35 less than March 2022.
  • At $18.38 per cwt, the March 2023 Class IV milk price declined 48 cents from February and is $6.44 less than March 2022. The Class IV milk price is just 28 cents more than the month’s Class III milk price, the narrowest spread since May 2022, reducing incentives for Class IV depooling.

Previously announced, the advanced Class I base price for March was $18.99 per cwt, down $1.79 from February and $3.89 less than March 2022.

Contributing to the March milk class price calculations, the values of butterfat and protein were up, but only slightly.

The value of butterfat rose about 1.2 cents from February to $2.73 per pound. It’s the third consecutive month the value of butterfat dropped below $3 per pound.

The value of milk protein rose about 4 cents from February to almost $2.41 per pound.

The value of nonfat solids fell 6 cents to about $1.02 per pound, while the value of other solids rose 2 cents to 23 cents per pound.

Feed cost factors: Acreage estimates

An early look at one component factoring into dairy feed costs – crop acreage – was released last week with the USDA’s annual Prospective Plantings report. There’s still time and weather to impact cropping plans, but early indications are acreage devoted to corn and soybeans will be up in 2023, with dry hay acreage rebounding slightly from last year’s 115-year low.

The report was based primarily on surveys of U.S. farmers conducted during the first two weeks of March. Here’s a summary:

  • Corn planted area for all purposes in 2023 is estimated at 92 million acres, up 3.42 million acres (4%) acres from last year. Largest increases are expected in North Dakota, Illinois, Indiana, Iowa, Kentucky, Minnesota and South Dakota. Record-high acreage is expected in Arizona and Idaho.
  • Soybean planted area for 2023 is estimated at 87.5 million acres, up slightly from last year. Increases of 100,000 acres or more are anticipated in Minnesota, North Dakota, South Dakota and Wisconsin. These increases are balanced by decreases of 100,000 acres or more in Arkansas, Indiana, Kansas, Michigan and Missouri. If realized, the planted area in Illinois, Nebraska, New York, Ohio and Wisconsin will be the largest on record.
  • Affecting cottonseed production, cotton planted area for 2023 is estimated at 11.3 million acres, down 18% from last year.
  • While it represents just part of total forage production, U.S. producers intend to harvest 50.6 million acres of all dry hay in 2023, up 2% from 2022. Largest increases in 2023 hay acreage are forecast in Texas, South Dakota and Colorado, offsetting declines in Kansas, Iowa and Illinois, where rising corn acreage is expected to compete for space. Driven by the increase in Texas, dry hay acreage in the 24 major dairy states is projected at 27.43 million acres, an increase of 810,000 acres (3%) from the year before. Record-low all hay harvested area in 2023 is expected in California – which will see the dry hay area fall below 800,000 acres – as well as in Illinois, North Dakota, Ohio and Wisconsin. The pre-season estimate doesn’t differentiate between alfalfa and other hay. In 2022, about 30% of all dry hay acreage was devoted to alfalfa and alfalfa mixtures.

GDT index declines again

The latest Global Dairy Trade (GDT) price index declined 4.7% in an auction held April 4. With the exception of cheese, prices in individual product categories were all lower:

  • Skim milk powder was down 2.5% at $2,579 per metric ton (MT, or about 2,205 pounds).
  • Whole milk powder was down 5.2% to $3,053 per MT.
  • Anhydrous milkfat was down 7.2% to $4,736 per MT.
  • Butter was down 3.3% to $4,595 per MT.
  • Cheddar cheese was up 3.8% to $4,167 per MT.

The GDT platform offers dairy products from six global companies: Fonterra (New Zealand), Dairy America (U.S.), Amul (India), Arla (Denmark), Arla Foods Ingredients (Denmark) and Polish Dairy (Poland). The next GDT auction is April 18.

Ag producer sentiment weakens

The economic outlook of agricultural producers weakened somewhat in March, according to results of the monthly Purdue University/CME Group Ag Economy Barometer survey. Although producers still cite high input costs as their top concern for their farm operations in the upcoming year, they are becoming more worried about rising interest rates and the impact those higher rates will have on their operations.

The Ag Economy Barometer provides a monthly snapshot of farmer sentiment regarding the state of the agricultural economy. The survey collects responses from 400 producers whose annual market value of production is equal to or exceeds $500,000. Minimum targets by enterprise are as follows: 53% corn/soybeans, 14% wheat, 3% cotton, 19% beef cattle, 5% dairy and 6% hogs. Latest survey results, released April 4, reflect ag producer outlooks as of March 13-17.

Farmers are becoming less confident that farmland values will continue to rise in the short run, with one out of five producers saying they expect values to weaken in the next 12 months, said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture.