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Better milk prices boost October DMC margin

Progressive Dairy Editor Dave Natzke Published on 02 December 2019

Stronger monthly average milk prices offset slightly higher corn and soybean meal prices to improve the income margin picture for U.S. dairy farmers in October. There will be no Dairy Margin Coverage (DMC) program indemnity payments at any level of coverage for a third straight month.

The USDA released its latest Ag Prices report on Nov. 27, including factors used to calculate October DMC payments. The October DMC margin was estimated at $10.88 per hundredweight (cwt), above the highest insurable margin of $9.50 per cwt (Table 1).

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DMC payments

October milk price nears $20

The October 2019 U.S. average milk price rose 60 cents per cwt from September to $19.90 per cwt. The average was $2.50 higher than October 2018 (Table 2) and is the highest monthly price since December 2014.

Through October, the average 2019 U.S. all-milk price stands at $18.15 per cwt, $2.06 more than the same period a year ago.

Dairy farmers in six states saw milk prices increase at least $1 from September, led by a gain of $1.80 in Idaho.

Compared to a year earlier, the average price in Idaho was up a whopping $4.10 per cwt, and producers in four other states (Iowa, Minnesota, Oregon and South Dakota) had increases of more than $3 per cwt.

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Producers in Oregon ($23.30) Florida ($22.70) and South Dakota ($22.30) had the nation’s high in October.

milk prices

Feed costs up

U.S. average corn and soybean meal prices were slightly higher in October, boosting average total feed costs.

The October average alfalfa hay price used in the DMC calculations was $192 per ton, down 50 cents from September and the low for the year. Soybean meal averaged $309.48 per ton in October, up $13.91 per ton from September; corn prices averaged $3.84 per bushel, up 4 cents.

That yielded an average DMC total feed cost of $9.02 per cwt of milk sold, up 13 cents from September (Table 3).

Markets fluctuate, but based on milk and feed futures prices as of Nov. 27, DMC margins are expected to peak above $12 per cwt in November and December, remain above $11 per cwt in January-March and stay above $10 for the rest of 2020.

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DMC margin calculations

Deadlines approaching

The deadline to enroll in DMC for 2020 is Dec. 13, 2019. Producers who locked in coverage in the 2019 sign-up must certify the operation is producing and commercially marketing milk and pay the annual administrative fee during the 2020 enrollment period. Premiums for 2020 coverage are not due until Sept. 1, 2020.

Also, dairy operations participating in DMC that had an intergenerational transfer between 2014 and 2019 have until Dec. 6, 2019, to take advantage of a one-time opportunity to increase their established production history during the 2019 and 2020 annual coverage election periods.

USDA buys butter, cheese

Some other numbers impacting dairy: The USDA’s Agricultural Marketing Service (AMS) awarded bids for the delivery of 1.72 million pounds of butter and 2.49 million pounds of cheddar cheese for distribution in domestic feeding programs in the first quarter of 2020. Purchased under the Trade Mitigation Program, total value of the bids was more than $10 million.

The accepted bids for butter covered about 1.07 million pounds from Challenge Dairy Products, Dublin, California, and about 328,300 pounds each from Associated Milk Producers Inc., New Ulm, Minnesota, and Prairie Farms Dairy, Carlinville, Illinois. Prices ranged from $2.45-$2.78 per pound.

The accepted bids for cheddar cheese covered about 504,000 pounds of shredded cheese at prices ranging between $2.225-$2.355 per pound from Dairy Farmers of America, headquartered in Kansas City, Kansas, and about 1.99 million pounds of cheese in one- and two-pound chunks at prices ranging between $2.12 and $2.3225 per pound from Great Lakes Cheese, headquartered in Hiram, Ohio.  end mark

Dave Natzke
  • Dave Natzke

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