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No DMC payment for August as margin improves

Progressive Dairy Editor Dave Natzke Published on 30 September 2019

A small improvement in the monthly average milk price combined with lower feed costs means there will be no Dairy Margin Coverage (DMC) program indemnity payment for August.

The USDA released its latest Ag Prices report on Sept. 27, including factors used to calculate August DMC payments. The August DMC margin was estimated at $9.85 per hundredweight (cwt), above the highest insurable margin of $9.50 per cwt, ending the DMC payment string for 2019 at seven months (Table 1).

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DMC indemnity payment

August milk price moves higher

The August 2019 U.S. average milk price rose 20 cents per cwt from July to $18.90 per cwt. The average was $3 higher than August 2018 (Table 2) and ties January 2017 as the highest monthly price since December 2014.

Through August, the average 2019 U.S. all-milk price stands at $17.79 per cwt, $1.94 more than the same period a year ago and the highest average for that seven-month period since 2014.

Florida’s average of $23.10 per cwt remained the nation’s high, followed by Oregon at $21.50 per cwt; at the low end, Michigan and New Mexico prices averaged $17.60 and $17.20 per cwt, respectively.

Compared to a year earlier, August 2019 milk prices were up $4.10 per cwt in Georgia and $3 per cwt or more in 10 other states.

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milk prices

Feed costs cheaper

U.S. average feed costs moved lower in August, with prices dropping for alfalfa hay, soybean meal and corn.

Under the revised DMC program formula, the USDA calculates a 50-50 blend price for alfalfa hay, averaging the U.S. average alfalfa hay price and the average price for dairy-quality alfalfa hay in the five largest milk-producing states each month – California, Idaho, New York, Texas and Wisconsin. The U.S. average alfalfa hay price for August was $179 per ton, down $4 from July. The dairy-quality alfalfa hay price averaged $208 per ton, down $1. As a result, the August alfalfa hay average price used in the DMC calculations was $193.50 per ton, down $2.50 from July and the low for the year.

Soybean meal averaged $296.42 per ton in August, down $14.35 per ton from July and more than $28 less than June 2019. August corn prices averaged $3.93 per bushel, down 23 cents from July.

That yielded an average DMC total feed cost of $9.05 per cwt of milk sold, down 38 cents from July and the lowest since May (Table 3).

Based on milk and feed futures prices as of Sept. 26, DMC margins are expected to move above $10 per cwt in September and could remain there until February 2020.

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DMC margin calculations

2019 DMC sign-up period closed

Enrollment in the 2019 DMC program closed on Sept. 27.

As of Sept. 23, 22,235 dairy operations had signed up for the DMC program. That number represents about 77% of the 28,968 dairy operations with established milk production history. Total DMC 2019 indemnity payments for those enrolled as of Sept. 23 were estimated at about $297.7 million, averaging $13,389.

Two other DMC significant dates remain in 2019.

  • After enrolling in the program for 2019, participating dairy operations who 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. Retroactive payments based on the increased production history will apply for 2019 and not prior years.

  • The deadline to enroll in DMC for 2020 is Oct. 7-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.  end mark
Dave Natzke
  • Dave Natzke

  • Editor
  • Progressive Dairy
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