Explore the factors behind May’s exceptional dairy margins reaching $10.52 per cwt amid elevated feed prices. What were the consequences for indemnity payments, and how are dairy producers faring as a result?
The Dairy Margin Coverage (DMC) program has demonstrated remarkable resilience, showcasing a robust dairy market as May’s margins soared to $10.52 per cwt—the highest since November 2022. Despite escalating feed prices, the absence of indemnity payments for the third consecutive month underscores the industry’s ability to weather economic challenges and emerge stronger. This should reassure stakeholders about the stability of the dairy industry.
USDA’s Agricultural Prices Report Highlights Robust Dairy Margins Amid Rising Feed Costs
| Month | Income over Feed Cost ($/cwt) |
|---|---|
| May 2024 | $10.52 |
| April 2024 | $9.60 |
| March 2024 | $9.50 |
| February 2024 | $8.90 |
| January 2024 | $9.20 |
| December 2023 | $9.30 |
On June 28, the USDA National Agricultural Statistics Service (NASS) released its Agricultural Prices report. This report helps calculate the feed costs used to determine the May Dairy Margin Coverage (DMC) program margins and indemnity payments. The information provided by NASS shows essential trends and changes in the dairy industry and is a valuable resource for stakeholders.
In May, income over feed cost was $10.52 per hundredweight (cwt), the highest margin since November 2022. This high margin indicates an excellent economic situation for dairy producers despite the ongoing rise in feed prices.
May’s Feed Cost Analysis Reveals a Multifaceted Picture of Rising Expenses Across Key Feed Components
| Feed Component | Price | Change from April | Change from May 2023 |
|---|---|---|---|
| Alfalfa hay | $276 per ton | Up $16 | Down $41 |
| Corn | $4.51 per bushel | Up 12 cents | Down $2.03 |
| Soybean meal | $388.65 per ton | Up $30.97 | Down $34.93 |
May’s feed cost analysis reveals rising expenses across key feed components. Alfalfa hay averaged $276 per ton, up $16 from April but $41 lower than last year, reflecting complex market dynamics.
Corn prices rose to $4.51 per bushel, an increase of 12 cents from April but down $2.03 from May 2023, highlighting broader market changes.
Soybean meal cost $388.65 per ton in May, up $30.97 from April but down $34.93 from last year, indicating decreased cost pressures compared to the previous year.
Total feed costs, calculated using the DMC formula, reached $11.48 per cwt of milk sold, a 58-cent rise from April. The strong milk market has helped dairy producers maintain favorable margins despite higher feed costs.
May Marks a Robust Rebound in Milk Prices, Led by Upper Midwest States’ Surge
| State | May 2024 Price ($/cwt) | April 2024 Price ($/cwt) | Change ($/cwt) |
|---|---|---|---|
| South Dakota | 23.00 | 19.40 | +3.60 |
| Minnesota | 22.90 | 19.50 | +3.40 |
| Iowa | 22.80 | 19.60 | +3.20 |
| Wisconsin | 22.70 | 20.00 | +2.70 |
| Florida | 24.80 | 24.80 | 0.00 |
The U.S. average all-milk price for May rose to $22 per cwt, the highest since January 2023 and a notable rebound. This $1.50 increase from April is $2.90 higher than last year, highlighting a more robust market for dairy producers.
Upper Midwest states saw significant increases. South Dakota plunged to $23 per cwt, up $3.60 from April. Minnesota, Iowa, and Wisconsin followed with notable rises of $3.40, $3.20, and $2.70 per cwt, respectively.
These improvements were driven by a rally in Class III milk prices, reflecting favorable market conditions and positive changes for many dairy producers. This should instill a sense of optimism in stakeholders about the dairy industry’s future.
A Period of Financial Resilience: How Dairy Producers Are Navigating Feed Price Volatility with Robust Margins
Substantial income over feed costs has provided dairy producers with a crucial buffer against volatile feed prices. Despite the increased costs, robust milk prices have maintained positive margins, essential for sustaining operations. This impressive financial resilience should instill confidence in stakeholders about the stability of the dairy industry.
The lack of indemnity payments for the third month in a row highlights the solid financial footing of many producers. Producers have navigated without needing supplemental assistance with income over feed costs above the DMC program’s top coverage level. Year-to-date, indemnity payments for those enrolled in the 2024 program have remained steady at $4,270, indicating a stable period.
Even with rising feed prices, this sustained period of favorable margins bodes well for the industry. It allows producers to reinvest in their operations and prepare for future market uncertainties. As margins remain strong with predictions for further improvements, the outlook for dairy producers looks promising.
A Promising Horizon for Dairy Margins: Projected Stability and Growth
The future for dairy margins looks promising. Per the DMC online decision tool forecast on June 28, margins are expected to stay strong, exceeding $12 per cwt for the rest of the year. This positive outlook relies on stable feed costs and a favorable all-milk price, expected to be above $21 per cwt through December.
October is projected to achieve the highest margin in the program’s history at $13.74 per cwt. This forecast indicates potentially excellent income over feed cost margins, reminiscent of strong financial performance in early 2022. However, market conditions can change, which could affect these predictions.
The Bottom Line
Despite elevated feed costs, the dairy sector maintains resilience with favorable margins and strong milk prices. May 2024’s income over feed cost was $10.52 per cwt—the highest since November 2022. South Dakota led the Upper Midwest price surge at $23 per cwt. This strength has negated the need for indemnity payments, though producers watch market trends closely. Projections suggest continued strong margins, potentially matching 2022 levels. The June margin, to be announced on July 31, will shed more light on the dairy sector’s financial outlook.
Key Takeaways:
- No indemnity payments for the Dairy Margin Coverage (DMC) program were issued for the third consecutive month.
- Income over feed costs remains favorable for dairy producers despite rising feed prices.
- May’s income over feed cost was $10.52 per hundredweight (cwt), the largest margin since November 2022.
- Average milk price in May was $22 per cwt, representing an increase of $1.50 from April and $2.90 from the previous year.
- Highest price improvements were recorded in the Upper Midwest states, with South Dakota leading at $23 per cwt.
- Feed costs have increased across all components: corn, alfalfa hay, and soybean meal.
- The May DMC total feed cost was $11.48 per cwt, up 58 cents from April.
- Despite these feed cost increases, strong milk prices have maintained robust margins for producers.
- Year-to-date indemnity payments are unchanged at $4,270 for producers enrolled in the 2024 program period.
- Predicted margins are expected to be strong for the remainder of the year, potentially matching 2022 values.
Summary:
The Dairy Margin Coverage (DMC) program has reached its highest margin since November 2022, indicating an excellent economic situation for dairy producers despite the ongoing rise in feed prices. The absence of indemnity payments for the third consecutive month reassures stakeholders about the dairy industry’s ability to weather economic challenges and emerge stronger. The USDA National Agricultural Statistics Service (NASS) released its Agricultural Prices report on June 28, which helps calculate feed costs used to determine the May Dairy Margin Coverage (DMC) program margins and indemnity payments. In May, income over feed cost was $110.52 per hundredweight (cwt), the highest margin since November 2022. May marked a robust rebound in milk prices, driven by a rally in Class III milk prices, reflecting favorable market conditions and positive changes for many dairy producers. Substantial income over feed costs has provided dairy producers with a crucial buffer against volatile feed prices, maintaining positive margins essential for sustaining operations.
