The USDA National Agricultural Statistics Service (NASS) released its Agricultural Prices report Sept. 27, which includes feed costs used to calculate the August Dairy Margin Coverage (DMC) program margins and indemnity payments. August’s margin was $13.72 per hundredweight (cwt).
A peek at August 2024 DMC
DMC program margin factors compared to the previous month:
- Alfalfa hay: $236 per ton, down $1
- Corn: $3.84 per bushel, down 39 cents
- Soybean meal: $343.40 per ton, down $20.90
- Total feed costs: $9.88 per cwt, down 59 cents
- Milk price: $23.60 per cwt, up 80 cents
- Margin above feed costs: $13.72 per cwt, up $1.39
Source: USDA Farm Service Agency, National Ag Statistics Service and Marketing Service Sept. 27, 2024
Market rally pushes milk prices forward
The announced all-milk price for August was $23.60 per cwt, up 80 cents from September and a staggering $4 greater than a year ago. This price comes after June and July all-milk remained steady at $22.80 per cwt, and a signal that dairy markets are still responding to the robust demand and constrained supply of product.
All 24 major dairy states saw an increase in the milk price from July to August. The greatest leaps were in Minnesota up $1.20 from a month prior to $23.90 per cwt and Wisconsin up $1.10 to $23 per cwt, with Idaho, Ohio and Pennsylvania all closely following with $1 per cwt more in August than in July. The smallest rise was noted in Florida and Texas with 30-cent increases to the milk price.
In this month’s report, all 24 major dairy states once again recorded price improvements in August compared to a year ago. The most expansive spread was in Georgia where prices were up $5.50 per cwt in August 2024 compared to August 2023. Other notable swings were in Indiana and Michigan with prices up $4.80 per cwt from a year prior. The smallest growth was in the Pacific Northwest with Oregon posting a milk price of $25.40 per cwt, up a marginal $2.90 from this month last year.
Feed costs remain steady from month prior
The price of feed in all categories used to calculate feed costs fell in August.
- At $236 per ton, August’s average price for dairy-quality alfalfa hay was down a mere $1 from the month prior. A year ago, the price for this feedstuff was at $282 per ton.
- The August average price for corn was down 39 cents from $4.23 per bushel in July, and down $1.89 per bushel from August 2023. Corn prices this low were last observed in November 2020.
- The average cost of soybean meal dropped $20.90 month-over-month from $364.30 per ton in July. August’s price was down $74.50 per ton from 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.
Poorer feedstuff prices led to an average DMC total feed cost of $9.88 per cwt of milk sold in August, down 59 cents from July and down $3.36 from a year prior.
August DMC margin is $13.72
The DMC margin forecast for August predicted a margin of $13.30 per cwt due to a slightly higher feed cost forecast and lower all-milk price forecast. The realized margin for August was $13.72 per cwt. At this margin, the August DMC margin is $4.07 above the $9.50 per cwt top coverage level in Tier 1, resulting in another month of no indemnity payments.
Predicted margin for September
While 2024 is shaping out to be a record year with favorable margins in the second half, the exact opposite was nearly true a year ago. In the first few years of the DMC program, feed costs grew at a quicker pace than milk prices, and that trend continued to reach highs in 2023. Then, in a sudden turn of events, the decline of the all-milk price outpaced the falling feed costs.
A summary of 2023’s catastrophic year is explained in this USDA article. The smaller milk margins of last year resulted in an average program payment of $74,097 per enrolled operation as total program payments neared $1.3 billion at year’s end.
As of Sept. 9, about 73% of all dairy operations with established production history are enrolled in the 2024 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.
The DMC online decision tool forecasts the margin to jump past $15 per cwt in September and remain there through November. At the time of this writing, the September DMC margin forecast is currently $15.07 per cwt. However, markets do change. The actual margin will be announced Oct. 31.
