Tag: dairy margin coverage

August DMC Margin Sets Record

Posted on by Theresa Sweeney

The Dairy Margin Coverage (DMC) monthly margin rose by $1.40/cwt from the month before to $13.72/cwt, the highest since margin protection replaced the old price support program as the basic dairy safety net program in January 2015. The August all-milk price was $23.60/cwt, up $0.80/cwt from July, and the DMC feed cost formula dropped by $0.60/cwt of milk, driven mostly by a lower corn price.

Late September dairy and grain futures indicated that the DMC margin would average around $12.20/cwt for all of calendar year 2024.

FMMO Persistence Pays off for Farmers

Posted on by Theresa Sweeney
  • USDA’s recommended FMMO decision incorporates NMPF proposals
  • Economics team member provided market outlooks and FMMO process updates across the country

NMPF’s Joint Economics Unit saw intense Federal Milk Marketing Order modernization in 2024, especially in the year’s earlier months. NMPF submitted its final legal brief to USDA in March, emphasizing that farmers are the reason the order system exists and that they should be the priority as USDA considers its final decision.

USDA released its recommended FMMO modernization plan July 1, agreeing in large part with the underlying principles of NMPF’s proposal. USDA’s biggest difference with NMPF was its establishment of a Class I mover for extended shelf-life products, which consists of the average of with an adjustable mover, even as most of the U.S. milk supply would revert to the “higher-of” formula in effect until 2019, as NMPF and its members advocated. NMPF-USDEC Joint Economics team members explain USDA’s recommended decision here.

Members of NMPF’s FMMO task force have reconvened to write comments on the recommended decision, which will be handed in by the Sept. 13 comment deadline for all stakeholders. USDA will review submissions and issue a final decision in November, followed by a producer referendum likely near the end of the year. Any changes will be implemented in early 2025, ending the formal FMMO modernization process.

Even as FMMO consumed team energy, members of the economics team traveled the country in 2024, providing expertise on changing market conditions throughout the year and updates on the FMMO modernization process.

Stephen Cain, senior director of research and economic analysis for NMPF, and Dr. Peter Vitaliano, vice president for economic policy and market research for NMPF, presented updates on the federal order modernization efforts to the NMPF Young Cooperators in February, the Southeast Milk Inc., Leadership Experience (SMILE) in May, and to the NMPF Board of Directors periodically. In August, Cain travelled to Detroit to update Michigan Milk Producers Association on the next steps in the process.

Producers were also updated on current and changing market conditions through 2024. Will Loux, senior vice president of global economic affairs for NMPF and USDEC, presented a domestic and export market outlook to South Dakota Dairy Producers in January and Dairy Farmers of America in July, as well as an update on the state of the dairy industry to the Idaho Milk Processors Association in August.

The economics team also met with the boards of United Dairymen of Arizona, Agri-Mark, Land O’Lakes, and Michigan Milk Producers Association to provide an update on Cooperatives Working Together renewal and modernization efforts. Cain and Dr. Vitaliano also provided outlook presentations for the National Ice Cream Mix Association annual meeting in January and to the American Butter Institute in April. Dr. Vitaliano also gave a butter-specific presentation to the joint American Dairy Products Institute-American Butter Institute annual conference in April.

Amid this backdrop, the dairy economy itself showed signs of improvement. The Dairy Margin Coverage Program, the main federal safety net for U.S. milk producers, saw its fourth highest ever margin in July, at $12.23/cwt, with the all-milk price at $22.80/cwt. End of August dairy and grain futures indicated that the DMC margin would average around $12.25/cwt for all of calendar year 2024.

June DMC Margin Gains $1.14/cwt to $11.66/cwt

Posted on by Theresa Sweeney

The Dairy Margin Coverage Program margin in June was $11.66/cwt after adding $1.14/cwt over the previous month.

The June all-milk price was $22.80/cwt, up $0.80/cwt from May, and the DMC feed cost dropped by $0.34 for the month, mostly on a lower premium alfalfa price. The DMC margin calculated by USDA has risen $2.06/cwt over the past two months, reaching a level well above the threshold at which payments are generated by falling margins.

Futures-based forecasts at the end of July indicate that the DMC margin will average about $11.90/cwt during 2024, $0.40/cwt higher than similar forecasts indicated a month ago, with a peak in October, a sign that producers may have an opportunity to repair battered balance sheets over the next several months.

May DMC Margin Jumps to $10.52/cwt as Higher Prices Outstrip Feed Costs

Posted on by Theresa Sweeney

The Dairy Margin Coverage Program rose sharply in May to levels well above the floor needed to trigger payments to dairy farmers, with milk prices rocketing past increasing feed costs to bolster dairy bottom lines.

Feed prices in May sharply reversed a falling trend of recent months to gain $0.58/cwt of milk from a month before, as measured by the DMC feed cost formula. All three formula components contributed measurably to the boost. Even so, May milk prices gained $1.50/cwt from April, rising to $22.00/cwt boosting the DMC margin by $0.92/cwt from the prior month to $10.52/cwt.

Available forecasts at the end of June indicate that the DMC margin will average about $11.50/cwt during 2024. This would be the second-highest average margin for a calendar year since margin protection became the basic federal safety net program for dairy.

April DMC Margin Little Changed from March

Posted on by Theresa Sweeney

The April Dairy Margin Coverage Program margin was $9.60/cwt, down by $0.05/cwt from March, just above the maximum $9.50/cwt maximum Tier 1 coverage level for the second month in a row.

The April All-Milk price dropped from March by $0.10/cwt to $20.50/cwt, and the April DMC feed cost calculation dropped by $0.15/cwt, on a $11/ton lower premium alfalfa hay price. Small changes in the corn and soybean meal prices offset each other on a per hundredweight of milk basis in the formula.

Available forecasts at the end of May indicate an increasingly high likelihood that the DMC margin will remain considerably above $9.50/cwt for the rest of the year.

NMPF Secures Dairy Wins in House Farm Bill

Posted on by Theresa Sweeney

The House Agriculture Committee-approved 2024 Farm Bill approved May 24 contains numerous NMPF-urged policy wins for dairy farmers, including an updated Dairy Margin Coverage Program and important support for its Federal Milk Marketing Order modernization proposal.

NMPF worked closely with House Agriculture Committee Chairman Glenn ‘GT’ Thompson, R-PA, and committee members on the bill approved on a bipartisan vote of 33-21. It now moves to the House floor for further consideration.

“We commend Chairman Thompson and committee members from both parties for approving a 2024 House Farm Bill that includes critical dairy priorities that will help support and grow this industry,” said Gregg Doud, president and CEO of NMPF in a statement. “We will do whatever we can to work with lawmakers in both chambers on a bipartisan basis to pass a new law as soon as possible, knowing that dairy is well-served by what the House Agriculture Committee approved today.”

Provisions benefiting dairy urged by NMPF are found across the bill’s titles, including ones that:

  • Extend the Dairy Margin Coverage (DMC) Program through 2029; update production history for participating dairies to be based on the highest production year of 2021, 2022, or 2023; and extend the ability for producers to receive a 25% premium discount for locking in five years of coverage;
  • Restore the “higher of” Class I mover to reinstate orderly milk marketing and require plant cost studies every two years to provide better data to inform future make allowance conversations, two key components of NMPF’s Federal Milk Marketing Order modernization proposal;
  • Support the bipartisan, House-passed Whole Milk for Healthy Kids Act to reverse the underconsumption of nutritious milk in schools;
  • Boost funding for critical dairy trade promotion programs and protect the use of common food names worldwide;
  • Support voluntary, producer-led conservation programs, such as the Environmental Quality Incentives Program, with dedicated funds for livestock operations and language encouraging states to prioritize methane-reducing practices;
  • Improve the certification of Third-Party Service Providers with technical expertise related to conservation planning to better assist producers participating in National Resources Conservation Service (NRCS) programs;
  • Continue the Farm and Ranch Stress Assistance Network; and
  • Increase funding for animal health initiatives and programs.

During the committee markup, two NMPF-backed amendments were offered for discussion.

  • Dusty Johnson, R-SD, with support from Representative Nick Langworthy, R-NY, offered an amendment to allow farmer-owned cooperatives with 2,500 or fewer employees to access the Rural Energy for America Program for energy efficiency projects.
  • Representative Derrick Van Orden, R-WI, offered an amendment to increase the authorization for the Dairy Business Innovation Initiatives from $20 million to $36 million. Chairman Thompson committed to collaborating with the sponsors of both amendments as the farm bill advances through the legislative process.

As House legislation advanced, Senate Agriculture Committee Chairwoman Debbie Stabenow, D-MI, released a comprehensive farm bill framework on May 1 including key dairy provisions, such as:

  • Extending the DMC program through 2029, including the option for producers to lock in their coverage and receive a 25% premium discount, while also updating production history for participating dairies to be based on the highest production year of 2021, 2022, or 2023;
  • Requiring plant cost studies every two years to provide better data to inform future make allowance conversations;
  • Supporting voluntary, producer-led conservation programs, such as the Environmental Quality Incentives Program, with dedicated funds for livestock operations and provisions supporting sustainable feed management; and
  • Protecting the use of common food names worldwide
  • Maintaining or boosting funding for key farm stress and animal health programs.

Senate Agriculture Committee Ranking Member John Boozman, R-AR, has announced plans to unveil his own farm bill framework in the coming weeks.

Small Changes in Costs, Prices Move March DMC Margin Above $9.50 Trigger

Posted on by Theresa Sweeney

The DMC margin rose by $0.21/cwt from February to March to $9.65/cwt, putting it just above the maximum $9.50/cwt maximum Tier 1 coverage level. The March All-Milk price rose by $0.10/cwt to $20.70/cwt, and the March DMC feed cost calculation dropped by $0.11/cwt, almost entirely on a $7.00/ton lower premium alfalfa hay price.

The DMC Decision Tool on the USDA/FSA website forecasts that the DMC margin will remain above $9.50/cwt for the rest of 2024. The enrollment period for the 2024 Dairy Margin Program ended on Tuesday. For those who are signed up for 2024 coverage, payments will be made for January’s and February’s triggered payments, depending on coverage level.

February DMC Margin Gains Nearly $1/cwt Over January

Posted on by Theresa Sweeney

The February margin under the Dairy Margin Coverage (DMC) program rose by $0.96/cwt from a month earlier to $9.44/cwt, triggering a payment of $0.06/cwt for coverage at the $9.50/cwt maximum Tier 1 level.

The rise was due to a $0.50/cwt increase in the February U.S. average all-milk price to $20.60/cwt, and a $0.46/cwt drop in the DMC feed cost formula, mostly as a result of lower corn prices.

Futures-based forecasts at the end of March indicated that DMC margins would remain mostly above the $9.50/cwt maximum Tier 1 coverage level during the remainder of the current calendar year, with possible brief dips below this level in late spring.

January DMC Margin Inches Up Just Four Cents Over December

Posted on by Theresa Sweeney

The January Dairy Margin Coverage program margin remained mired below the $9.50/cwt maximum Tier 1 coverage level, gaining just 4 cents over December to come in at $8.48/cwt and generating a payment of $1.02/cwt for that maximum coverage.

The national average All-milk price in January dropped $0.50/cwt from December to $20.10/cwt, while a $0.54/cwt drop in the DMC feed cost calculation offset that decline to result in the margin’s small improvement. The feed-cost decline was mostly driven mostly by a falling soybean meal price, assisted by slightly lower corn and premium alfalfa hay prices.

End-of-February futures-based forecasts indicated that DMC margins would remain mostly above the $9.50/cwt maximum Tier 1 coverage level for the rest of 2024.

NMPF’s Galen Urges DMC Signup

Posted on by Alan Bjerga

NMPF Senior Vice President Chris Galen detailed improvements to the Dairy Margin Coverage program in an interview with the National Association of Farm Broadcasters. “We encourage people to look at the dairy margin coverage program if they’re not already covered or to make adjustments in their coverage levels, because you don’t know what’s going to happen with either milk prices or feed costs,” he said.

NMPF’S Galen Discusses DMC Signup, Impact of Government Shutdown on Farm Bill

Posted on by Chris Galen

NMPF’s Senior Vice President Chris Galen explains to Dairy Radio Now listeners the importance of using the Dairy Margin Coverage program, now that signup for 2024 is open until April 29.  He also predicts what will happen with a looming government shutdown, and how that could impact prospects for the next Farm Bill.

NMPF Urges DMC Signup as USDA Announces Enrollment

Posted on by Theresa Sweeney

Statement from NMPF President & CEO Gregg Doud:

“Dairy farmers are pleased to finally have the certainty of knowing when the Dairy Margin Coverage (DMC) program signup is beginning, and NMPF urges every dairy farmer to strongly consider signing up. DMC itself is improved from the previous farm bill, thanks to the permanent incorporation of updated production histories in the program, and recent low producer margins underscore just how critical DMC is for dairy farms of all sizes. We thank Congress for making this important change and are grateful for USDA’s work in rolling out this updated program for farmers.

“NMPF is eager to assist producers in any way they can with this program. We also look forward to working to ensure that farmers receive what they need even more – a new farm bill that provides certainty for the next several years, and not just 2024.”

USDA announced today that the 2024 Dairy Margin Coverage sign-up will open Feb. 28 and run through April 29. For more NMPF resources related to the DMC program and other federally backed risk management programs, visit here.