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Surging Feed Costs Drop the February DMC Margin

April 5, 2022

The second highest monthly surge in feed costs since the emergence of margin protection as the main federal safety net for farmers lowered the Dairy Margin Coverage Program margin by $0.34/cwt, to $11.20/cwt, in February.

Steady increases in feed costs for the past year and a half were kicked into a yet higher gear by the developing Russia-Ukraine situation, raising fears of reduced global grain production. The February DMC feed cost was $13.50/cwt, up $0.84/cwt from a month earlier and the highest since the introduction of margin protection in 2014. Two-thirds of this increase came from a jump in the price received by U.S. farmers for corn.

Offsetting the jump somewhat – but not enough – was an increase of the U.S. average all-milk price by $0.50/cwt to $24.70/cwt.

The dairy and grain futures markets currently indicate the DMC margin will gradually increase during the remainder of 2022.