April DMC Margin Little Changed from March

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

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

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

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

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

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

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

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.

NMPF’s Vitaliano Offers 2024 Dairy Economic Outlook

 

NMPF’s Vice President of Economic Policy Peter Vitaliano provides Dairy Radio Now listeners a look ahead at what farm-level milk prices will do in 2024. Farmers should benefit from lower feed costs, and with milk production expected to remain stagnant again this year, prices should gradually improve.

December DMC Margin Reverses Trend, Drops to $8.44/cwt

The December margin under the Dairy Margin Coverage (DMC) program bucked the trend that began in August of improving milk prices and margins, sliding $1.14/cwt to $8.44/cwt and matching the margin last seen in September. The renewed weakness was due almost entirely to a $1.10/cwt fall in the December all-milk price from November. The December DMC feed cost rose by 4 cents a hundredweight to $12.16/cwt of milk, with higher corn and premium alfalfa hay prices almost offset by a lower soybean meal price.

The average margin for all months of 2023 was $6.70/cwt, effectively tying last year with 2021 for the lowest average calendar-year margin under both the DMC and its predecessor, the Margin Protection Program (MPP). End-of-January futures-based forecasts indicated DMC margins averaging between $10.20/cwt and $11.00/cwt in 2024.

November DMC Margin Barely Tops $9.50 for the First Time in 2023

The November margin under the Dairy Margin Coverage (DMC) program inched up $0.14/cwt from a month earlier to $9.58/cwt, marking its first time in 2023 above the maximum $9.50/cwt Tier 1 coverage level.

The monthly change was a product of modest price movements. The all-milk price rose $0.10/cwt to $21.70/cwt, while the DMC feed cost formula dropped $0.04/cwt to $12.12/cwt of milk. There was a bit more drama inside the DMC feed cost formula, with a $0.35/cwt increase in the soybean meal price factor slightly more than offset by a combined drop in the prices of corn and premium alfalfa hay. During the first ten months of this year, the average monthly change, plus or minus, in the margin was $1.22/cwt, the average monthly change in the all-milk price was $1.15/cwt and the average monthly change in the DMC feed cost was $0.37/cwt.

With one more month in to be reported for last year, the 2023 average margin is on track to average about $6.80/cwt, which would be the second-lowest margin for the DMC and its predecessor Margin Protection Program (MPP), just above 2021’s average DMC margin of $6.70/cwt. The end-of year futures prices indicated the margins would average about $8.60/cwt during January-September this year but improve during the fourth quarter to average about $9.10/cwt for the year.

DMC Margin Gains $1 in October

The Dairy Margin Coverage (DMC) Program margin in October saw another significant monthly increase, as the futures markets had been anticipating. The all-milk price rose $0.60/cwt from September to $21.60/cwt., and the October DMC cost was down by $0.40/cwt to $12.16/cwt., mostly due to a lower corn price. The October margin was therefore $9.44/cwt, generating just a 6-cent margin payment for coverage at the $9.50/cwt Tier 1 level.

The dairy and grain futures markets are anticipating the substantial increases the DMC margins  have made over the past three months, from $3.52/cwt in July to October’s $9.44/cwt, have hit pause, and the margin will remain at or modestly below the $9.50/cwt level for the next several months.