The USDA National Agricultural Statistics Service (NASS) released its Agricultural Prices report Feb. 29, which includes feed costs used to calculate January Dairy Margin Coverage (DMC) program margins and indemnity payments. While average feed costs were lower than December 2023, another month of lower milk prices brought the average milk income margin to $8.48 per hundredweight (cwt).
At look at January 2024 DMC
DMC program margin factors compared to the previous month:
- Alfalfa hay: $274 per ton, down $1 from December 2023
- Corn: $4.74 per bushel, down 6 cents
- Soybean meal: $378.40 per ton, down $62.20
- Total feed costs: $11.62 per cwt, down 54 cents
- Milk price: $20.10 per cwt, down 50 cents
- Margin above feed cost: $8.48 per cwt, up 4 cents
Source: USDA Farm Service Agency, National Ag Statistics Service and Ag Marketing Service, Feb. 29, 2024
Milk prices lower again
The January 2024 announced U.S. average milk price fell 50 cents from December 2023 to $20.10 per cwt, exactly $3 per cwt lower than the average milk price a year ago.
Milk prices were suppressed across most of the 24 major dairy states. The largest declines were recorded in South Dakota ($1.30 per cwt lower than December 2023), Arizona ($1.10 per cwt), and Oregon and Wisconsin (both $1 per cwt). Michigan and Texas producers had modest growth to their milk price at 20 cents per cwt and 10 cents per cwt above December 2023, respectively.
Compared to last year, January 2024’s U.S. average milk price was down $3 per cwt, led by declines of $3 per cwt or more in California, Colorado, Illinois, Minnesota, Oregon, South Dakota, Utah and Wisconsin.
Feed prices all dropped
National average costs for major feedstuffs were all down from December 2023:
- At $4.74 per bushel, the average price for corn was down 6 cents from the previous month.
- The average cost of soybean meal declined from $440.60 per ton to $378.40 per ton.
- The January average price for dairy-quality alfalfa hay was $274 per ton, down just $1 than a month earlier.
The DMC feed cost for each month is calculated by summing three numbers: (1) the corn price per bushel times 1.0728; plus (2) the soybean meal price per ton times 0.00735; plus (3) the alfalfa hay price per ton times 0.0137.
January feedstuff prices yielded an average DMC total feed cost of $11.62 per cwt of milk sold, down 54 cents from December 2023.
Indemnity payments kick in
At $8.48 per cwt, the January DMC margin triggers Tier 1 indemnity payments of $1.02 per cwt for producers that elected for the $9.50 per cwt coverage level. Those covered at $9 per cwt will see payments of 52 cents per cwt, while those at $8.50 per cwt will receive 2 cents per cwt. Payments are expected to be issued as soon as March 4.
All 2024 DMC indemnity payments are subject to a 5.7% sequestration deduction.
There are no indemnity payments for Tier II producers at any level.
Looking ahead: Enrollment and payments
Enrollment for the 2024 DMC program began Feb. 28 and will run through April 29. Producers are encouraged to enroll in the program, which was authorized through the end of 2024 with the 2018 Farm Bill extension.
Read: 2024 DMC program enrollment to begin Feb. 28
As of Feb. 29, the February DMC margin was forecast at $9.40 per cwt, which would only trigger Tier I indemnity payments at the $9.50 coverage level. The actual February margin will be announced March 28.
