The USDA National Agricultural Statistics Service (NASS) released its Agricultural Prices report July 31, which includes feed costs used to calculate June Dairy Margin Coverage (DMC) program margins and indemnity payments. June’s margin was $11.66 per hundredweight (cwt).
A glance at June 2024 DMC
DMC program margin factors compared to the previous month:
- Alfalfa hay: $256 per ton, down $20
- Corn: $4.48 per bushel, down 3 cents
- Soybean meal: $384.10 per ton, down $4.55
- Total feed costs: $11.14 per cwt, down 34 cents
- Milk price: $22.80 per cwt, up 80 cents
- Margin above feed costs: $11.66 per cwt, up $1.14
Source: USDA Farm Service Agency, National Ag Statistics Service and Marketing Service, July 31, 2024
Milk price continues climbing in June
The announced all-milk price for June was $22.80 per cwt, up 80 cents from May and a remarkable $5 climb from a year ago. This is the highest U.S. average all-milk price since January 2023 when it was reported at $23.10 per cwt.
All 24 major dairy states recorded an increase in their milk price in June compared to a month prior. The greatest leap was seen in Arizona, with an increase of $1.20 per cwt from May, followed by California, Florida, Michigan and Ohio, all up $1.10 per cwt. While Minnesota posted the smallest increase from May to June with only a 20-cent improvement, the milk price was $7.30 per cwt larger than June 2023, just shy of Iowa’s leading $7.40 per cwt year-over-year surge. The smallest year-over-year growth came from Florida with a milk price of $2.60 per cwt more than June 2023.
Feed prices flip from month ago
In a complete 180 degrees from May’s agricultural prices, the price of feed in all categories used to calculate feed costs declined in June. The weakened markets gave way to more than a quarter decline in total feed costs per hundredweight.
- The June average price for corn was down 3 cents from $4.51 a month ago, and down a shocking $2.01 from June 2023.
- At $256 per ton, June’s average price for dairy-quality alfalfa hay was down $20 from May and $54 from the previous year.
- The average cost of soybean meal dropped from $388.65 per ton in May for a price of $384.10 per ton, $29.36 lower than a year ago.
The DMC feed cost 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.
June feedstuff prices produced an average DMC total feed cost of $11.14 per cwt of milk sold, down 34 cents from a month prior.
IOFC highest since June 2022
With falling feed costs and strengthening milk prices, June’s income over feed cost (IOFC) was the highest in two years at $11.66 per cwt. The last time producers saw a margin to this degree was in June 2022 at $11.92 per cwt. At this margin, the June DMC margin is $2.16 above the $9.50 per cwt top coverage level in Tier I, resulting in no indemnity payments for the month.
As of July 1, about 72% of all dairy operations with established production history are enrolled in the 2024 DMC program. The program is expected to pay out $37.1 million in payments to enrolled dairies by the year’s end. These operations (15,605 dairies) are expected to be paid an average of $2,383 each, yet this value varies greatly based on production history as well as the selected coverage percentage and coverage level under the program.
Looking ahead: Predicted margins and premium balances due
The DMC online decision tool predicts favorable margins for the remainder of 2024. As of July 31, margins are anticipated to climb in the coming months, peaking at $14.52 per cwt in October with a feed cost of $10.29 per cwt and a milk price of $24.81 per cwt. Although, markets do change.
The July DMC margin forecast is at $12.32 per cwt. The actual margin will be announced Aug. 30.
All participating dairy operations of the 2024 DMC program are required to pay outstanding premium balances by Sept. 1. Producers whose fee has not been covered by indemnity payments yet this year will receive a letter by Aug. 5 with instructions on how to remit the balance through any county Farm Service Agency office or online.
