Tag: USDA DMC program

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.

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.

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

Posted on by Theresa Sweeney

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.

DMC Margin Gains $1 in October

Posted on by Theresa Sweeney

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.

DMC Margin Drops Below $4 for First Time Ever

Posted on by Theresa Sweeney

The June Dairy Margin Coverage (DMC) margin dropped by $1.18/cwt from a month earlier to $3.65/cwt, the first time it’s been below $4/cwt since margin protection became the basic federal safety net mechanism for dairy in 2014. It will generate a lot of $0.35/cwt payments for Tier 2 coverage at the free $4/cwt coverage level, as well as payments of $5.85/cwt for coverage at the maximum $9.50/cwt Tier 1 coverage level. The June all-milk price was $1.40/cwt lower than in May, the same as the April to May drop a month earlier, while the DMC June feed cost was only $0.22/cwt of milk lower than May’s, due relatively evenly to slight drops in the prices of all three feed formula components.

Available forecasts indicate the margin will improve slightly in July from the June level, then increase rapidly from August through October and approach $9.50/cwt by December.

DMC Margin Drops More than $1 in May to Record Low

Posted on by Theresa Sweeney

The May Dairy Margin Coverage (DMC) margin dropped by $1.01/cwt from April to $4.83/cwt, the lowest it’s ever been and the first time below $5/cwt during the life of the current program or that of its predecessor, the Margin Protection Program (MPP), triggering payment at both the Tier I and Tier II levels.

The May all-milk price dropped by $1.40/cwt from a month earlier to $19.30/cwt, while the DMC feed cost eased lower by $0.39/cwt in that time, on lower corn and soybean meal prices. The May payment for the maximum Tier 1 coverage at the $9.50/cwt level will be $4.67/cwt. The May payment for the low-cost Tier 2 coverage at the $5.00/cwt level will be $0.17/cwt.

Available forecasts anticipate the margin dipping down closer to $4/cwt during early summer, with a bottom in July, and not rebounding above $9.50/cwt until early in 2024.

DMC Margin Decline Slows Significantly in March

Posted on by Theresa Sweeney

Following three straight months when the Dairy Margin Coverage (DMC) margin dropped by well over $1.00/cwt, the margin dropped again in March, but by just 11 cents from February.

The milk price was down again, for the fifth month in a row, to $21.10/cwt, $0.50/cwt less than the month before, and feed costs were down by almost as much, $0.40/cwt, the first monthly drop on the DMC feed cost since last November. The lower feed costs were driven almost equally by drops in the prices of all three feed components of the formula, when expressed on a milk equivalent basis. The March DMC margin of $6.08/cwt will result in a payment of $3.42/cwt for Tier 1 coverage at the maximum $9.50/cwt level.

Available forecasts currently indicate that the monthly DMC margins are close to bottoming out for the year, at around $6.00/cwt in a month or two, followed by a slow rise that still looking may not exceed $9.50/cwt until the fourth quarter.

DMC Margin Posts Another Sizeable Drop in February

Posted on by Theresa Sweeney

The Dairy Margin Coverage (DMC) program will pay $3.31/cwt for $9.50/cwt coverage in February, based on a margin of $6.19/cwt that month. This was $4.70/cwt less than the margin last November. A milk price drop of $1.50/cwt from a month earlier and a $0.25/cwt rise in the DMC feed cost formula combined to lower the February margin by $1.75/cwt from its level in January.

Available forecasts currently indicate that the monthly DMC margins are close to bottoming out for the year, at around $6.00/cwt in a month or two, followed by a slow rise that will not likely top $9.50/cwt until the fourth quarter. This year will return many times the cost of this very affordable means of managing margin risk.

No DMC payments for October as Prices Rise

Posted on by Theresa Sweeney

The U.S. average all-milk price rose $1.50/cwt in October from a month earlier, boosting the month’s DMC margin well above the $9.50/cwt maximum coverage level needed to trigger program payments, after two months of payouts.

The October margin was $10.71/cwt, $2.09/cwt higher than September’s margin. The DMC feed cost dropped by $0.59/cwt in October, driven entirely by a sizeable drop in the price of corn.

Another small payment for $9.50/cwt Tier 1 coverage may be triggered in December, based on current projects. Payments this year under the program, for August and September, together total the equivalent of about $0.19/cwt on an annualized basis and would be enough to cover the annual premium for a farmer enrolled in DMC at the $9.50 coverage level.

May Sets Third Consecutive Monthly Milk-Price Record

Posted on by Theresa Sweeney

The USDA-reported national average all-milk price for May was $27.30/cwt, topping the April price by $0.20/cwt for a new monthly record, the third consecutive month of all-time-high prices.

The May DMC feed cost eased back by two cents from April’s record to $14.79/cwt, boosting the May DMC margin by $0.22/cwt to $12.51/cwt, the highest monthly margin since the DMC program began in January 2019.

The milk price outlook for the remainder of 2022 has been weakening slightly in recent weeks, as high dairy product wholesale prices have caused a spike in retail dairy price inflation, generating concerns about whether consumers may respond by buying fewer dairy products. All current projections of the DMC margin continue to anticipate that it will remain above the $9.50/cwt maximum coverage level under the program for the remainder of 2022.

Surging Feed Costs Drop the February DMC Margin

Posted on by Theresa Sweeney

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.

NMPF Statement on USDA’s Extension of 2022 DMC Signup

Posted on by Theresa Sweeney

Statement from NMPF President and CEO Jim Mulhern on USDA’s Extension of 2022 DMC Signup:

“Dairy farmers thank USDA and Secretary Vilsack for extending signup for this year’s Dairy Margin Coverage Program in order to maximize producer signup for this important program. DMC offers cost-effective margin protection for small and medium-sized producers and inexpensive catastrophic coverage for larger dairies. It provides critical protection against unforeseen market disruptions – and if the past two years have shown anything, it’s that unforeseen market disruptions can happen. We urge all producers to sign up for DMC protection, part of a suite of NMPF-supported, federally backed risk-management that also includes the Dairy-RP and LGM-Dairy programs.”

For more information on DMC and NMPF’s support for effective risk management, visit NMPF’s website here.