The USDA National Agricultural Statistics Service (NASS) released its Agricultural Prices report June 28, which includes feed costs used to calculate May Dairy Margin Coverage (DMC) program margins and indemnity payments. May’s income over feed cost was $10.52 per hundredweight (cwt), the largest margin since November 2022.
A glance at May 2024 DMC
DMC program margin factors compared to the previous month:
- Alfalfa hay: $276 per ton, up $16
- Corn: $4.51 per bushel, up 12 cents
- Soybean meal: $388.65 per ton, up $30.97
- Total feed costs: $11.48, up 58 cents
- Milk price: $22 per cwt, up $1.50
- Margin above feed costs: $10.52 per cwt, up 92 cents
Source: USDA Farm Service Agency, National Ag Statistics Service and Marketing Service, June 28, 2024
Milk prices respond positively to markets
May’s announced U.S. average all-milk price was $22 per cwt, up $1.50 from April. This is the highest U.S. average all-milk price since January 2023 and $2.90 higher than the price recorded this month last year.
All but three states in the 24 major dairy states posted increases in their milk price, a welcomed difference from April’s report and certainly a sigh of relief when comparing prices from a year ago. States in the Upper Midwest recorded the greatest price improvements, with South Dakota leading the way at $23 per cwt, up $3.60 from a month prior. Falling closely behind were Minnesota (up $3.40 per cwt), Iowa (up $3.20 per cwt) and Wisconsin (up $2.70 per cwt). These prices were the result of a rally in Class III milk.
The May 2024 U.S. average all-milk price was up nearly $3 when comparing prices from a year ago. The largest spread was once again South Dakota at $4.30 per cwt greater this month than May 2024. Idaho also saw a strong price improvement with $3.90 per cwt more than this time last year. Fortunately, no state recorded a decline in prices year over year, however, Florida did not see a difference with prices remaining the same at $24.80 per cwt.
Feed prices remain elevated
The costs of feed in the three categories used to calculate feed costs rose in May by 58 cents compared to April. Due to the strong milk market, these increases did not weigh too heavily on margin calculations.
- The May average price for corn was up 12 cents at $4.51 per bushel from a month prior and down an astounding $2.03 from May 2023.
- At $276 per ton, the average price for dairy-quality alfalfa hay was up $16 from April but down $41 from the previous year.
- The average cost of soybean meal rose from $357.68 per ton in April to $388.65 per ton in May yet was $34.93 per ton lower than a year ago.
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.
May feedstuff prices generated an average DMC total feed cost of $11.48 per cwt of milk sold, up 58 cents from April.
Margin doesn’t trigger indemnity payments
Despite strong feed prices, a bullish milk market carried producers through May. At $10.52 per cwt, the May DMC margin is $1.02 above the $9.50 per cwt top coverage level in Tier I, the fiercest margin since November 2022 when income over feed cost was $10.89 per cwt.
Year-to-date indemnity payments remain unchanged at $4,270 for producers enrolled in the 2024 program period. As of this writing, program enrollment information for 2024 is unavailable.
Predicted margins could match 2022 values
Income over feed cost margins appear strong for the remainder of the year, according to the DMC online decision tool forecast as of June 28. The tool predicts margins over $12 per cwt as feed costs look to hold relatively steady, while the all-milk price forecast surpasses $21 per cwt through December. If realized, October is slated to be the largest margin in the program’s history at $13.74 per cwt. The last time margins of this magnitude were logged was during the first half of 2022. It’s important to remember that markets do change.
The June DMC margin is forecast at $12.12 per cwt. The actual June margin will be announced July 31.
