Feed prices were up but milk prices rose even more, meaning there will be no Dairy Margin Coverage (DMC) program indemnity payments at any level for December milk marketings.
Natzke dave
Editor / Progressive Dairy

The USDA released its latest Ag Prices report on Jan. 31, including factors used to calculate December 2021 DMC margins and payments. According to preliminary calculations by Progressive Dairy, the December DMC margin is $9.53 per hundredweight (cwt), above the top Tier I insurable level of $9.50 per cwt (Table 1). The official USDA numbers will be posted on the USDA’s DMC website.

DMC payments

The December 2021 DMC margin is 39 cents higher than November‘s margin and the highest in 13 months. It marks the first month since November 2020 that average margin topped $9.50 per cwt.

Milk price highest since 2014

The November 2021 announced U.S. average milk price rose $1 from November to $21.80 per cwt. It’s the highest monthly average since November 2014.

December milk prices were higher than the month before in all 24 major dairy states (Table 2), with largest increases ($1.20-$1.60 per cwt) in Indiana, Texas and Wisconsin. Producers in 10 states saw average prices above $22 per cwt, with a high of $24.50 per cwt in Florida. Only New Mexico had an average price of less than $20 per cwt.

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Prices received for milk

Compared to a year earlier, December 2021’s U.S. average milk price was up $3.50 per cwt. Among individual states, prices were up $4 or more in Arizona, California, Idaho, Oregon and Washington.

All feed prices higher

Offsetting some of the gain in the average milk price were higher average costs for alfalfa hay, corn and soybean meal (Table 3).

DMC margin calculations

  • The average price for corn rose 20 cents from November to $5.47 per bushel, the highest since August.

  • The average cost of soybean meal rose for a second consecutive month, up more than $40 from November, to $399.53 per ton, the highest since May.

  • With the DMC change to include the price of dairy-quality alfalfa hay in feed cost calculations, December’s average price was $253 per ton, up $7 from November.

December feedstuff prices yielded an average DMC total feed cost of $12.27 per cwt of milk sold, up 61 cents from November and the highest since August.

Year-to-date DMC payments

With the stronger December margin, 2021 indemnity payments are winding down. Some producers may still be eligible for retroactive payments under the Supplemental DMC program, which allows small and midsized producers to adjust their milk production history.

Through Jan. 31, 2021, DMC payments totaled about $1.185 billion, a slight adjustment lower than previous reports. Those enrolled at the Tier I $9.50 per cwt level received more than $23,000 per 1 million pounds of covered milk for the year, after the 5.7% sequestration deduction.

Enrollment in the Supplemental DMC program is required before enrolling in DMC for 2022. The enrollment period for both 2022 DMC and Supplemental DMC programs is open until Feb. 18, 2022.  end mark

Dave Natzke