The 2024 year ended with Class III prices showing more traction in December than in previous months as cheese and whey protein prices improved, and Class IV prices remained elevated to reflect strong market conditions. Futures for quarter one of 2025 anticipate income over feed cost margins to fall some but remain historically elevated, according to the HighGround Dairy report, “Dairy Producer Market Update,” released Dec. 18.
The report stated, “Milk prices remain strong, feed costs are low and margins are among the most favorable seen in the past decade. With the commodity markets prone to volatility, it’s crucial for producers to capitalize on opportunities like these while they last.”
Here's Progressive Dairy’s look at important dates, reports and advice affecting risk management decisions, as well as other information impacting the milk check in January.
Dairy Margin Coverage (DMC) program
The November 2024 DMC margin and indemnity payment will be announced Tuesday, Dec. 31, with December’s margin calculated Friday, Jan. 31, 2025.
The realized DMC margin for October was $15.17 per hundredweight (cwt), a 40-cent fall from September, but still one of the highest in the program’s history. October became the eighth consecutive month where no indemnity payments were issued. (Read: October DMC margin is $15.17)
As of Dec. 23, the November 2024 margin forecasts are predicting a margin of $14.65 per cwt as the all-milk price is expected to drop nearly $1 from October’s realized price, and the feed costs forecast falls 53 cents from the month prior. Again, at this margin, no indemnity payments will be triggered.
Just after midnight Dec. 21, an extension for the 2018 Farm Bill was approved by Congress and signed by President Joe Biden as part of a funding deal. This will allow the DMC program to continue for another 12 months and has effectively avoided the “dairy cliff” where an expired farm bill reverts to the Agricultural Act of 1949, or “permanent law.” At the time of this writing, forecasts were not available for DMC in the new year.
Dairy Revenue Protection (Dairy-RP)
Dairy producers managing risk through Dairy-RP are eligible to cover revenue quarterly, up to five nearby quarters. In January, Dairy-RP coverage is available for the first quarter of 2025 (January through March) through the first quarter of 2026.
The market changes daily and Dairy-RP endorsements must be purchased between the Chicago Mercantile Exchange (CME) market closing and the next CME opening. Dairy-RP is not available on days when applicable futures contacts move limit-up or limit-down, or on days when CME trading is closed due to holidays (see Calendar).
Also, Dairy-RP coverage cannot be purchased on days when major USDA dairy reports that could impact markets are released. This includes Milk Production, Cold Storage and Dairy Production reports.
Livestock Gross Margin for Dairy (LGM-Dairy)
LGM-Dairy is another subsidized margin insurance program administered by the USDA’s Risk Management Agency (RMA).
The insurance program provides a protection when feed costs rise or milk prices drop, and can be tailored to any size farm. The program uses futures prices for corn, soybean meal and milk to determine the expected gross margin and the actual gross margin. LGM-Dairy is similar to buying both a call option to limit higher feed costs and a put option to set a floor on milk prices.
Coverage can be purchased on expected milk marketing over a rolling 11-month insurance period. So the coverage period during January 2025 includes the months of February 2025 through December 2025.
The sales period for the LGM-Dairy program is open on a weekly basis. Unlike Dairy-RP, LGM-Dairy is available even if a sales period falls on the day of a USDA report. Premium payments are due at the end of the insurance period.
Production and price outlooks
- As California continues to battle an outbreak of highly pathogenic avian influenza (HPAI) H5N1 in dairy cows, milk production has taken a hit with a loss of 9.2% year over year in November, bringing the U.S. milk production down 1% during the same time period. (Read: Milk production down 1% from USDA estimates a year ago)
- The Federal Milk Marketing Order (FMMO) advanced Class I base price declined to start the new year at $20.38 per cwt, the lowest since June 2024. (Read: Economic Update: Class I base price starts new year weaker)
- Compared with October, November 2024 statistically uniform milk prices declined in eight of 11 FMMOs, while those with highest fluid Class I milk utilization posted small increases. (Read: November 2024 FMMO uniform milk prices remain fluid)
- Milk production in 2025 is raised based on more expected milk cows, partially offset by slower growth in milk per cow. (Read: USDA projections highlight increased milk production)
Check the Progressive Dairy website for updates affecting milk prices as they become available.
