April DMC margin hits $12.29 per cwt
June 1, 2022
Record-high milk prices offset higher feed costs in April, improving monthly dairy producer milk income over feed cost (IOFC) margins calculated under the Dairy Margin Coverage (DMC) program.
The USDA released its latest Ag Prices report on May 31, including factors used to calculate April DMC margins and potential indemnity payments. The April DMC margin is $12.29 per hundredweight (cwt), above the top Tier I insurable level of $9.50 per cwt (Table 1). It’s up 74 cents from the March margin and the highest since November 2014.
Milk price sets another new high
The April 2022 announced U.S. average milk price rose $1.20 from March to $27.10 per cwt, another new record high. Through the first four months of 2022, the U.S. all-milk price has averaged $25.48 per cwt, surpassing the $24.70 per cwt average for January-April 2014.
April milk prices were at least $1 higher than the month before in 23 of 24 major dairy states (Table 2), with the lone exception being California, up 80 cents. Monthly average milk prices topped $28 per cwt in six states and were $29 per cwt or higher in three: Florida, Georgia and South Dakota. Largest month-to-month increases were in South Dakota and Wisconsin, each up $1.80 per cwt.
The highest prices were in Florida and Georgia at $29.70 and $29.20 per cwt, respectively. New Mexico was the only state where the April average price was less than $25 per cwt.
Compared to a year earlier, April 2022’s U.S. average milk price was up $8.80 per cwt. Year-over-year prices were up $9 per cwt or more in 12 states, led by a $10 increase in Washington.
Feed costs continue to rise
While the news was good on the milk income side of the ledger, total feed costs also moved to another record high, pushed by prices for corn and alfalfa hay (Table 3).
The average price for corn rose another 52 cents from March to $7.08 per bushel, the highest on record since the inception of the DMC program or its predecessor, the Margin Protection Program for Dairy (MPP-Dairy).
With the DMC change to include the price of dairy-quality alfalfa hay in feed cost calculations, the April average price for hay was $271 per ton, up $2 from March and also the highest on record.
The average cost of soybean meal dipped slightly to $476.70 per ton, a three-month low. (The USDA’s Agricultural Marketing Service no longer reports monthly average soybean meal prices used in DMC calculations, so the average is based on weekly averages during the month.)
April feedstuff prices yielded an average DMC total feed cost of $14.81 per cwt of milk sold, up 46 cents from March and the highest during the DMC or MPP-Dairy era dating back to March 2014.
Other costs escalate
The larger IOFC margin means there’s a little more money to cover other production inputs. However, those costs continue to rise. The April index of prices paid for commodities and services, interest, taxes and farm wages was up 1% from March 2022 and up 14% from April 2021.
Cull cow prices strengthen
While higher milk prices provided incentives to keep cows in the herd this spring, prices paid for cull cows also rose.
U.S. prices received for cull cows (beef and dairy, combined) averaged $88.10 per cwt during April 2022, up $3.40 from March 2022, up $17.10 from April 2021 and the highest monthly average since October 2015. Through the first four months of 2022, cull cow prices have averaged $80.58 per cwt, about $14.68 more than January-April 2021.
Despite those prices, dairy cull cow slaughter continues at a slower pace than a year ago. Through May 14, weekly slaughter in federally inspected plants totaled 1.23 million head, about 39,700 head fewer than the same period a year earlier. Contributing to that decline, the USDA estimated there were about 98,000 fewer cows in U.S. herds in April 2022 compared to a year earlier.