November DMC margin strengthens to $9.14 per cwt

Progressive Dairy Editor Dave Natzke

December 30, 2021

Higher milk prices offset an increase in feed costs, boosting November’s Dairy Margin Coverage (DMC) program income margin to $9.14 per hundredweight (cwt), according to preliminary calculations by Progressive Dairy.

The USDA released its latest Ag Prices report on Dec. 30, including factors used to calculate November 2021 DMC margins and payments. In addition to higher milk prices, alfalfa hay prices declined from the previous month for the first time since March.

The November 2021 DMC margin is 60 cents higher than October’s revised margin and the highest since November 2020. With the higher margin, only producers insured at the Tier I $9.50 per cwt level will see a small indemnity payment for November milk marketings (Table 1).

That translates to an average indemnity payment of about $285 per 1 million pounds of milk. The November payments are on one-twelfth of a dairy operation’s covered annual production history, and DMC payments are subject to a 5.7% sequestration deduction in 2021.

Average milk price nears $21

The November 2021 announced U.S. average milk price rose $1.10 from October to $20.80 per cwt. It’s the highest monthly average since November 2020.

November milk prices were higher than the month before in all 24 major dairy states (Table 2), with largest increases ($1.60-$1.70 per cwt) in Georgia, Texas, Virginia and Washington. Producers in 12 states saw average prices above $21 per cwt, with a high of $23.40 per cwt in Florida. Producers saw average prices below $20 per cwt in Arizona, Kansas, Michigan and New Mexico.

Compared to a year earlier, the November 2021 U.S. average milk price was down 30 cents per cwt. Among individual states, price comparisons were mixed, with heaviest declines in high Class III utilization areas.

New hay price included

In addition to the higher milk prices, corn and soybean meal prices also moved higher in November (Table 3). November feedstuff prices yielded an average DMC total feed cost of $11.66 per cwt of milk sold, up 50 cents from October.

  • The average price for corn rose 25 cents from October to $5.27 per bushel.

  • After falling for five consecutive months, the average cost of soybean meal rose more than $33 from October to $358.73 per ton.

  • November 2021 marks the first month the USDA has incorporated 100% of the cost of dairy-quality alfalfa hay in monthly feed cost DMC calculations. The November average price was $246 per ton, down $1 from October and the first month-to-month decline since February-March. Earlier in December, the USDA recalculated all previous monthly DMC hay prices, feed costs and margins from January 2020 through October 2021, paying additional indemnity payments retroactively for that period. The new hay prices, feed costs and margins are updated in Table 3.