July’s all-milk price fell to $25.70, a $1.20 decrease from June. The income over feed costs, as calculated by Dairy Margin Coverage (DMC) was $9.92, $2.00/cwt. less than June. While no indemnities will be paid for July milk, Erick Metzger, general manager for National All-Jersey, Inc., in Reynoldsburg, Ohio, says that we are approaching the point where DMC could be paid out in the coming months.
“Corn price was $7.25/bu., down 12 cents,” he says. “Hay jumped $56/ton to $333 and soybean meal was $467.87/ton, up $22.”
However, Phil Plourd, head of market intelligence at ever.ag, says as things currently sit, he doesn’t anticipate any DMC payments in 2022.
“In fact, in our model, current futures don’t show many months with a DMC reading below $10 per hundredweight,” he says.
Plourd says the futures markets and their model also show margins above the payout zone for 2023.
“Of course, a lot can change between here and next month, never mind distant months in 2023,” he says.
Plourd anticipates the feed situation to remain volatile and generally expensive over the medium-term, if not longer.
“We still have drought in major parts of the country,” he says. “It doesn’t look as though we are going to have bin-buster crops in the U.S. Russia/Ukraine remains problematic. And we don’t think anyone sees quick fixes to the fertilizer situation anytime soon. It’s a challenging environment. At the same time, it won’t be long before we are talking about crop prospects in South America and the prospects for at least a little relief.”
2021, A Different Tune
In 2021, DMC payments were triggered, paying out ten months in a row. And, a record of more than $1.1 billion DMC payments was distributed. Jim Mulhern, National Milk Producers Federation President and CEO thanked the USDA and Secretary Vilsack for extending DMC signup for 2022.
“DMC offers cost-effective margin protection for small and medium-sized producers and inexpensive catastrophic coverage for larger dairies. It provides critical protection against unforeseen market disruptions – and if the past two years have shown anything, it’s that unforeseen market disruptions can happen,” Mulhern states.
Farm Service Agency (FSA) also followed suit and encouraged dairy operations to take advantage of the DMC program and extended the deadline to sign up.
“Over the past two years, American dairy farmers have faced unprecedented uncertainty, from the ongoing pandemic to protracted natural disasters. As producers continue to manage these interconnected challenges, FSA has tools at the ready to provide critical support,” said FSA Administrator Zach Ducheneaux. “At 15 cents per hundredweight at the $9.50 level of coverage, DMC is a very cost-effective risk management tool for dairy producers.”
