The USDA National Agricultural Statistics Service (NASS) released its Agricultural Prices report May 31, which includes feed costs used to calculate April Dairy Margin Coverage (DMC) program margins and indemnity payments. A $9.60 per hundredweight (cwt) margin was the result of a rally in milk during the second half of the month to offset the steady feed markets.
A glance at April 2024 DMC
DMC program margin factors compared to the previous month:
- Alfalfa hay: $260 per ton, down $11
- Corn: $4.39 per bushel, up 3 cents
- Soybean meal: $357.68 per ton, down $4.49
- Total feed costs: $10.90 per cwt, down 15 cents
- Milk price: $20.50 per cwt, down 20 cents
- Margin above feed costs: $9.60 per cwt, down 5 cents
Source: USDA Farm Service Agency, National Ag Statistics Service and Marketing Service, May 31, 2024
Milk prices slip slightly
The April 2024 announced U.S. average all milk price was $20.50 per cwt, down 20 cents from March, but enough to offset the steady feed costs.
Many of the 24 major dairy states saw a decrease in milk price by 20 cents, similar to that of the U.S. average all-milk price month-over-month change. Only four states saw modest growth, including Florida and Georgia (both 30 cents per cwt higher than in March) and Pennsylvania and Virginia (both up 10 cents per cwt). Idaho and Texas were two states to report no change in milk price. The largest decline in milk price was recorded in Oregon at $1.10 per cwt below March’s price.
Comparing prices from a year ago, April 2024’s U.S. average all-milk price was down a dime from April 2023. The largest year-over-year declines were noted in Oregon at $1.40 per cwt less than a year prior and South Dakota at a staggering $2.30 per cwt less than April 2023. Inversely, Georgia saw the greatest year-over-year increase at $2.40 per cwt more than a year prior.
Feed prices work in producers’ favor
Continuing the trend from March, the majority of feed costs in the three categories used to calculate feed costs weakened in April. The lone exception was corn, which strengthened just slightly but was still far below last year’s price at $6.70 per bushel.
- The April average price for corn was the sole feedstuff with a price increase at $4.39 per bushel, 3 cents above March’s price.
- The average cost of soybean meal continued its decline in April with a price of $357.68 per ton compared to $362.17 a month prior.
- At $260 per ton, the average price for dairy-quality hay was down $11 from March 2024.
The DMC feed cost for each month is calculated 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.
April feedstuff prices generated an average DMC total feed cost of $10.90 per cwt of milk sold, down 15 cents from March.
No indemnity payments triggered
At $9.60 per cwt, the April DMC margin is 10 cents above the $9.50 per cwt top coverage level in Tier I, resulting in now two consecutive months of no indemnity payments for dairy producers enrolled in the risk management program.
Year-to-date indemnity payments total $4,270 for producers enrolled in the 2024 program period. As of this writing, program enrollment information for 2024 is still unavailable.
Improved margins expected for remainder of year
Margins for the remainder of 2024 appear strong according to the DMC online decision tool as of May 30. The tool indicates an expected average margin at $11.34 per cwt, with the average feed cost forecast weakening and the all-milk price forecast improving month over month. At current projections, favorable margins are anticipated through the end of the year, although markets do change.
The May DMC margin is forecast at $11.08 per cwt, the result of the milk price jumping nearly $2 above April’s price. The actual May margin will be announced June 28.
