The USDA National Agricultural Statistics Service (NASS) released its latest Ag Prices report on Oct. 31, including factors used to calculate September 2023 Dairy Margin Coverage (DMC) margins and indemnity payments. Compared to a month earlier, overall U.S. average feed costs were lower and milk prices were up, pushing the milk income margin up another $2 per hundredweight (cwt) to the highest level since December 2022.

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Editor / Progressive Dairy

September 2023 DMC at a glance

DMC program margin factors compared to previous month:

  • Alfalfa hay: $288 per ton, up $6 from August 2023
  • Corn: $5.21 per bushel, down 52 cents
  • Soybean meal: $411.07 per ton, down $27.73
  • Total feed costs: $12.56 per cwt, down 68 cents
  • Milk price: $21 per cwt, up $1.30
  • Margin above feed cost: $8.44 per cwt, up $1.98

Source: USDA Farm Service Agency, National Ag Statistics Service and Ag Marketing Service, Oct. 31, 2023

Milk prices hit six-month high

The September 2023 announced U.S. average milk price rose $1.30 from August to $21 per cwt, the highest since March. It was still down $3.10 per cwt from September 2022’s revised average of $24.10 per cwt.

September milk prices were higher than the month before in all 24 major dairy states, with largest increases of $1.90-$2 per cwt in Georgia, Florida and Virginia.


Month-to-month increases were smallest in Iowa and Wisconsin, both up 60 cents per cwt.

High prices for the month were in high Federal Milk Marketing Order (FMMO) Class I fluid milk utilization states of Florida ($24.70 per cwt), Georgia and Virginia ($24.20). Average prices were below $20 per cwt in Iowa, Kansas, New Mexico and Wisconsin.

Compared to a year earlier, September 2023’s U.S. average milk price was down $3.10 per cwt, led by a decline of $5.10 in Georgia.

Feed costs lower

National average costs for major feedstuffs were lower, with declining corn and soybean meal prices offsetting an increase in the average price for dairy-quality alfalfa hay:

  • At $5.21 per bushel, the average price for corn was 52 cents lower than a month earlier and the lowest since October 2021.
  • The average cost of soybean meal (SBM) dipped to $411.07 per ton, down $27.73 from August and the lowest since December 2021.
  • The September average price for dairy-quality alfalfa hay was $288 per ton, up $6 from the previous month.

The DMC feed cost for each month is calculated by summing three numbers: (1) the corn price per bushel times 1.0728; plus (2) the soybean meal price per ton times 0.00735; plus (3) the alfalfa hay price per ton times 0.0137.

September feedstuff prices yielded an average DMC total feed cost of $12.56 per cwt of milk sold, down 68 cents from August.

Indemnity payments shrink

At $8.44 per cwt, the September DMC margin triggers Tier I indemnity payments at only $8.50, $9 and $9.50 per cwt coverage levels. Payments are $1.06 per cwt at the maximum $9.50 coverage level, 56 cents at the $9 level and 6 cents at the $8.50 level. There are no indemnity payments for Tier II producers.

All 2023 DMC indemnity payments are subject to a 5.7% sequestration deduction.

According to National All Jersey’s Erick Metzger, milk protected at the $9.50 per cwt level will realize indemnity payments of about $789 for each 1 million pounds enrolled.

Past payments

With the outlook for improved margins through the end of the year, growth in total DMC indemnity payments has slowed substantially. Through Oct. 2, DMC indemnity payments distributed through the USDA’s Farm Service Agency (FSA) for the first eight months of 2023 (January-August) had reached nearly $1.24 billion.

Indemnity payments and average payments per dairy operation in the previous four years were:

  • 2022: $83.7 million, averaging $4,664 – indemnity payments were triggered in just two months (August and September).
  • 2021: $1.187 billion, averaging $62,280 – indemnity payments were triggered in 11 of 12 months.
  • 2020: $234 million, averaging $17,340 – indemnity payments were triggered in five months.
  • 2019: $451.6 million, averaging $19,319 – indemnity payments were triggered in seven months.

Based on latest enrollment data as of Oct. 2, 17,056 dairy operations are enrolled in the 2023 DMC program, representing about 74% of operations with established production history. January-August DMC payments averaged $72,424 per dairy operation enrolled in 2023.

Annual milk volume covered under the program totals 155.8 billion pounds, about 77% of production history established in 2023. The report does not include enrollment in the Supplemental DMC program.

Without a 2023 Farm Bill or temporary extension of the 2018 Farm Bill, the DMC program expires at the end of the calendar year. To read Progressive Dairy’s look ahead at important dates, reports and advice affecting risk management decisions, as well as other information impacting your milk check, visit Dairy risk management calendar: November 2023

NMPF: Domestic demand strengthens price outlook

Reduced milk production and strong domestic consumption are showing up in dairy product production and inventory levels, according to National Milk Producers Federation’s Peter Vitaliano. Summarizing dairy markets in the October 2023 Dairy Management Inc./National Milk Producers Federation Dairy Market Report, he said that’s helping set the stage for a milk price rebound.

However, weakness in world dairy demand has dropped the share of U.S. milk solids production exported this year by about a full percentage point from the record levels of the previous two years. This year’s rate has remained in the mid-16% range.

For more information on commercial use, dairy trade, milk production, product inventories, prices and margins, view the October 2023 Dairy Market Report.

Other operating costs mixed

Outside of feed – and not factored into DMC margins – other costs were mixed.

  • The September index of prices paid for commodities and services, interest, taxes and farm wages was up 0.1% from August but unchanged from September 2022.
  • Machinery costs were unchanged from August but up 2.3% from September a year ago.
  • The September fuel cost index was up 3.9% from the previous month but 8.3% less than a year earlier.
  • Fertilizer prices rose 0.7% from August and 31% from September 2022.

Market cow prices stay strong

Another positive in the USDA Ag Prices report: U.S. average prices received for cull cows (beef and dairy, combined) in September averaged $114 per cwt, down just $1 from the eight-year high of $115 in August 2023.