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Dairy Margins Plunge in April, With Major Positive Swing Expected Later

June 2, 2020

The Dairy Margin Coverage (DMC) program margin for April was $6.03 per cwt., a drop of $3.13 per cwt. from March. A $3.60 per cwt. lower milk price, coupled with a $0.47 per cwt. lower feed cost calculation, mostly due to lower corn and soybean meal prices, produced the drop. The April margin will generate a payment for that month to all producers currently enrolled in the program for margin coverage levels from $6.50 per cwt. up through $9.50 per cwt.

The steep drop in the April margin has been long anticipated by the dairy futures, which currently indicate another drop to around $5 per cwt. in May. However, as bad as this year’s second quarter will be for the nation’s struggling dairy farmers, the recent futures are continuing to show a considerably brighter light at the end of the current very dark pandemic tunnel. As recently as the beginning of May, the outlook was for a very slow and painful recovery for margins throughout the remainder of 2020, with June being as bad as May and the margins remaining below $9.50 per cwt. through the end of the year. But just a month later, the outlook now shows the June margin recovering to around $8.50 per cwt. and the margins from July through December reasonably likely to remain above $9.50 per cwt. The May 28-based forecast by USDA’s DMC Decision Tool is shown in the chart below.

The DMC information page on NMPF’s website offers a variety of educational resources to help farmers make better use of the program. NMPF also posted a new video explaining how farmers can benefit from the DMC.