The USDA National Agricultural Statistics Service (NASS) released its Agricultural Prices report Aug. 30, which includes feed costs used to calculate the July Dairy Margin Coverage (DMC) program margins and indemnity payments. July’s margin was $12.33 per hundredweight (cwt).
A glance at July 2024 DMC
DMC program margin factors compared to the previous month:
- Alfalfa hay: $237 per ton, down $19
- Corn: $4.24 per bushel, down 24 cents
- Soybean meal: $364.30 per ton, down $19.80
- Total feed costs: $10.47 per cwt, down 67 cents
- Milk price: $22.80 per cwt, unchanged
- Margin above feed costs: $12.33 per cwt, up 67 cents
Source: USDA Farm Service Agency, National Ag Statistics Service and Marketing Service, Aug. 30, 2024
Milk prices remain strong
The announced all-milk price for July was $22.80 per cwt, unchanged from June and $5.50 higher than a year ago. This value is reflective of prices received nearly two years ago as production and demand have kept pace with each other.
A majority of the 24 major dairy states saw an increase in their milk price in July from a month prior. The largest upswings were in Georgia and Florida at $27.10 and $27 per cwt, up $1.20 and $1.10 per cwt, respectively. The remaining states recorded modest growths or slight declines in milk price by as little as a dime.
All 24 major dairy states recorded price improvements in July 2024 compared to a year ago, with Oregon seeing the smallest increase at $4.20 per cwt. Once again, Midwest states had the largest spread in prices year over year. South Dakota posted the greatest increase from July 2023 to July 2024 with an astonishing $7.50 per cwt improvement. Iowa and Minnesota closely followed with year-over-year price increases of $7.30 per cwt and $7.10 per cwt, respectively.
Feed costs lowest since 2021
The price of feed in all categories used to calculate feed costs continued their decline in July, with both alfalfa and corn posting prices not seen since 2021.
- The July average price for corn was down 24 cents from $4.48 per bushel a month ago and just shy of $2 from July 2023. July’s price is the lowest since January 2021 when corn prices posted the same price per bushel.
- At $237 per ton, July’s average price for dairy-quality alfalfa hay was down $19 from June and $51 from a year prior. Prices this low were last observed in July 2021 at $232 per ton.
- The average cost of soybean meal dropped from $384.10 per ton in June to $364.30 per ton in July, reflecting prices similar to February 2024.
The DMC feed cost each month is calculated summing three numbers: the corn price per bushel times 1.0728, plus the soybean meal price per ton times 0.00735, plus the alfalfa hay price per ton times 0.0137.
The weaker feedstuff prices led to an average DMC total feed costs of $10.47 per cwt of milk sold in July, down 67 cents and the lowest since December 2020.
DMC margin is $12.33 per cwt
The DMC margin forecast for July predicted a margin of $12.47 per cwt, with a lower milk price and feed costs. The realized margin was $12.33 per cwt, as reported feed costs were a bit more than expected but the all-milk price did not sway from June. This month's margin is the highest since May 2022 when the margin was calculated at $12.51 per cwt. At $12.33 per cwt, the July DMC margin is $2.83 above the $9.50 per cwt top coverage level in Tier 1, resulting in no indemnity payments for the month.
As of Aug. 5, almost three-quarters of all dairy operations with established production history are enrolled in the DMC program. Those 15,644 operations are expected to receive $37.1 million in payments by the year’s end with each dairy to receive an estimated $2,375. Remember, this value does vary based on production history as well as the selected coverage percentage and coverage level under the program.
Predicted margin for August
The DMC online decision tool predicts improved margins for the remainder of the year. As of Aug. 30, margins are forecast to reach a program high of $15.70 per cwt in November with a feed cost of $10.48 per cwt and an all-milk price of $26.18 per cwt. However, markets do change.
The August DMC margin forecast is at $13.05 per cwt. The actual margin will be announced Sept. 27.
