April 2023 DMC at a glance
Dairy Margin Coverage (DMC) program margin factors compared to previous month:
- Alfalfa hay: $315 per ton, up $1 from March 2023
- Corn: $6.70 per bushel, up 3 cents
- Soybean meal: $457.25 per ton, down $27.15
- Total feed costs: $14.86 per cwt, down 16 cents
- Milk price: $20.70 per cwt, down 40 cents
- Margin above feed cost: $5.84 per cwt, down 24 cents
Source: USDA Farm Service Agency, National Ag Statistics Service and Ag Marketing Service, May 31, 2023
The USDA National Agricultural Statistics Service (NASS) released its latest Ag Prices report on May 31, including factors used to calculate April 2023 Dairy Margin Coverage (DMC) margins and indemnity payments. A declining U.S. average milk price more than offset lower average overall feed costs, keeping the milk income margin at its lowest level since August 2021.
Milk prices lower
The April 2023 announced U.S. average milk price fell 40 cents from March to $20.70 per cwt, the lowest since October 2021.
April milk prices were lower than the month before in all 24 major dairy states, led by declines of 70 cents or more in Idaho, Iowa, New York and Oregon.
High price for the month was in Florida, at $24.10 per cwt. Average prices were below $20 per cwt in Arizona, Iowa, Kansas and New Mexico.
Compared to a year earlier, April 2023’s U.S. average milk price was down $6.30 per cwt, led by declines of $6.50 or more in Arizona, Idaho, Iowa, Kansas, Minnesota, South Dakota, Texas, Utah, Washington and Wisconsin.
Feedstuff costs mixed
National average costs for major feedstuffs were mixed, with a lower soybean meal (SBM) price offsetting small increases for corn and alfalfa hay:
- At $6.70 per bushel, the average price for corn was 3 cents higher than a month earlier.
- The average cost of SBM declined to $457.25 per ton, down $27.15 from March.
- The April average price for dairy-quality alfalfa hay was $315 per ton, up $1 from the previous month.
The DMC feed cost for each month is calculated by summing three numbers: the corn price per bushel times 1.0728, plus the soybean meal price per ton times 0.00735, plus the alfalfa hay price per ton times 0.0137.
April feedstuff prices yielded an average DMC total feed cost of $14.86 per cwt of milk sold, down 16 cents from March.
Indemnity payments
At $5.84 per cwt, the April DMC margin triggers Tier I indemnity payments at all coverage levels from $6 to $9.50 per cwt, with a top payment of $3.66 per cwt at the maximum $9.50 coverage level. Other indemnity payments are: $9 coverage level – $3.16; $8.50 – $2.66; $8 – $2.16; $7.50 – $1.66; $7 – $1.16; and $6.50 – 66 cents. Tier II indemnity payments are triggered at $6 to $8 coverage levels.
All 2023 DMC indemnity payments are subject to a 5.7% sequestration deduction.
Looking ahead
The April 2023 margin continues to be what looks like a lengthy stretch of high indemnity payments into July-August.
As of May 1, 16,868 dairy operations had enrolled in the 2023 DMC program, representing about 72.8% of operations with established production history. Milk volume covered under the program totaled 156.6 billion pounds, about 78% of production history. January-March indemnity payments were estimated at about $305.4 million.
The enrollment figures do not include enrollment in the Supplemental DMC program.
Other operating costs mostly lower
Outside of feed – and not factored into DMC margins – other costs were mostly lower. The April index of prices paid for commodities and services, interest, taxes and farm wages was down 0.2% from March but up 1.5% from April 2022.
Machinery costs were unchanged from March and were up 4.5% from April a year ago. The April fuel cost index was down 0.3% from the previous month and 22% less than a year earlier, with lower diesel prices offsetting higher gasoline prices. Fertilizer prices dipped 3.8% from March and 23% from April 2022.
Market cow prices up
U.S. average prices received for cull cows (beef and dairy, combined) in April averaged $99.30 per cwt, up $3.60 from March and the highest monthly average since September 2015.
The strong beef prices and tight milk income margins didn’t impact U.S. dairy cull cow marketing, however. After setting a three-decade high in March, April U.S. dairy cull cow marketing returned to a more normal pace.
Read: Economic update: April dairy cull cow marketing slowed
Read also: Dairy risk management calendar: June 2023
