Dairy Revenue Protection

RMA Unveils Major 2027 Livestock Insurance Updates: What Producers Need to Know

Mon, 18 May 2026 18:28:49 GMT

The USDA Risk Management Agency (RMA) has announced significant updates to the Livestock Risk Protection (LRP), Livestock Gross Margin (LGM) and Dairy Revenue Protection (DRP) programs. These changes, approved by the Federal Crop Insurance Corporation (FCIC), take effect starting with the 2027 crop year.

According to RMA Administrator Pat Swanson, these enhancements aim to put “Farmers First” by expanding eligibility and strengthening risk management tools for dairy and livestock operations.

Uniform Changes Across All Livestock Programs

Beginning in 2027, LRP, LGM and DRP policies will share several standardized updates:

Beginning Farmer/Rancher Definition: Eligibility and subsidy percentages are now aligned with the One Big Beautiful Bill Act, extending the definition of a beginning producer to 10 years.
Concurrent Coverage: Producers can now hold coverage in similar livestock programs simultaneously.
Subsidy Capture: New language addresses off-exchange contracts to ensure fair subsidy application.
Policy Cancellation: Policies that do not earn a premium for three consecutive years will be subject to automatic cancellation.
Clarified Transfers: Revised language provides clearer guidelines on when and how insurance coverage can be transferred.

LRP Updates

LRP protects producers against declining market prices. For 2027, the program features expanded categories and longer coverage windows:

New “Unborn” Categories: Producers can now insure unborn calves in the 6 to 9 cwt. range (Weight 2) for:
- Unborn Bulls and Heifers
- Unborn Brahman
- Unborn Dairy
Cull Cow Expansion: Coverage for cull cows has been extended to a maximum of 52 weeks.
Higher Weight Limits: The maximum weight threshold for fed cattle has been increased.
Forage Disaster Exemption: New guidelines address extended drought and natural disasters, including specific grazing dates for exemptions.

LGM Updates

LGM protects against unexpected decreases in gross margin (market value minus input costs). Key updates for cattle producers include:

Increased Weights: The maximum insurable weight for LGM cattle is now 1,800 lb.
Target Weight Adjustments: Target feeder cattle weights increased from 9 to 12 cwt. for yearling finishing operations.
Ownership Requirements: To qualify for LGM cattle, producers must own calves for a minimum of five months (yearlings) or eight months (calf finishing).
Live Cattle Weights: Maximum target weights increased to 18 cwt. for yearlings and 16 cwt. for calf finishing.

DRP Updates

DRP protects dairy operations against declines in quarterly revenue.

Sales Period Alignment: The sales period end date will move to the following calendar day, bringing DRP in line with the structure used in other livestock insurance products.

How to Apply for 2027 Livestock Insurance

LRP, LGM and DRP are available in all 50 states. Because federal crop insurance is sold exclusively through private agents, producers should:

Locate an agent using the RMA Agent Locator .
Review specific operation needs for the 2027 crop year.
Visit rma.usda.gov for “Basics for Beginners” and other educational resources.

Dairy's 2026 Safety Net: Producers are Moving from DMC to DRP

Tue, 24 Feb 2026 14:56:55 GMT

In the high-stakes world of dairy production, the margin between a profitable versus a catastrophic year is often measured in pennies. For decades, the industry relied on a relatively simple equation: the price of milk minus the price of feed. In 2026, that equation is more complex. The tools that once served as a reliable safety net are now facing a paradox – a reality where the data says producers are thriving, but the checkbook says otherwise.

To understand the future of dairy survival, the two pillars of the federal safety net must be dissected: Dairy Margin Coverage (DMC) and Dairy Revenue Protection (DRP). While one is a legacy program struggling to adapt to a world of hidden costs, the other is a flexible, high-tech shield that is rapidly becoming the industry standard.

The Dairy Margin Coverage Era: A Foundation in Flux

The Dairy Margin Coverage program, created by the 2018 farm bill, was designed to be the ultimate insulator against market shocks. Through various iterations from the 2014 farm bill’s Margin Protection Program for Dairy (MPP-Dairy) to the current DMC program, the program has been a statistical success. For most producers, the math is compelling: An average premium of 15 cents per cwt yields an average payment of $1 per cwt.

The structure for DMC, which is administered by the Farm Service Agency (FSA), is simple. Tier 1 offers a “safe harbor” for the first 5 million pounds of production, allowing for coverage up to $9.50 per cwt. Tier 2 allows larger operations to cover their excess production at a lower $8 cap and higher premiums.

However, the “success” of the DMC has hit a wall and is increasingly becoming a thing of the past. The formula relies on four main ingredients: the National All-Milk Price, corn, soybean meal and premium alfalfa. When these crop prices are low, the “calculated” margin looks healthy.

This is where the paradox lies.

“When crop prices are this low, it makes the milk margin under the DMC program look really high on paper, which is why the program didn’t trigger payments at any coverage level between May 2024 and November 2025,” says Danny Munch with the American Farm Bureau Federation.

The December 2025 pricing data finally points to the first payments in more than a year, but only for producers covered at the highest available $9.50 margin (at a $9.42 per cwt margin), he adds.

According to Katie Burgess with Ever.Ag, the DMC program uses national numbers for both the milk price and feed costs, so it has never really reflected the reality of any individual dairy operation.

“For the sake of keeping it simple and straight forward, I believe [the DMC program] does a fine job of representing a margin over feed. Of course, it’s not capturing the non-milk or feed data, so it’s not accounting for the higher non-feed costs the past few years. It’s also not making any adjustments for higher cull cow and calf revenue either,” she says. “For a producer really looking to dial in their margins, it’s not perfect. But, for a producer looking for some basic coverage against falling milk prices or rising feed costs, it does the trick – especially when you consider it comes at an affordable premium cost of 15 cents per hundredweight for the $9.50-margin Tier 1 coverage.”

The “Hidden Cost” Crisis

The primary criticism of the current DMC is its simplicity. Grant Grinstead with Vir-Clar Farms in Wis., says the DMC formula doesn’t account for modern cost factors.

“There are so many other cost factors that come into play now versus just feed,” he says. “I think we’re still missing some of that for true risk protection ... it makes us look like we’re doing better than we are.”

“The additives, minerals and fuel costs — those costs play a role,” Munch adds.

Beyond inputs, there is the massive, uncounted elephant in the room: labor. In fact, since 2016, the cost of keeping a reliable team on the ground has surged by 30% to 50%, driven by a tightening rural workforce and rising cost of living. This especially holds true for farms in states that have mandated overtime laws for dairy employees.

As dairy operations scale, labor has moved from a minor line item to one of the largest expenses on the balance sheet. Because DMC only looks at feed, a producer can be losing money on every gallon of milk due to labor and fuel, yet USDA data will show they are operating in a “healthy” margin.

Industry leaders are now “ringing the bell” for a formula enhancement. Suggestions include a “floor” for feed costs to protect those who grow their own crops or the inclusion of a “total cost of production” index that accounts for the reality of additives, minerals and human capital.

The Rise of Dairy Revenue Protection

As the DMC program struggles with its rigid formula, producers are shifting to a more surgical tool: DRP. Launched by the USDA Risk Management Agency in 2018, the program covered nearly 30% of all U.S. milk production in 2025.

Unlike the DMC, which focuses on the margin, DRP is designed to insure against unexpected declines in quarterly revenue. It is a “fluid” policy — markets change daily, and the coverage can be adjusted to match. For the lifetime of the program through 2025, net indemnities to producers have totaled more than $850 million, proving its effectiveness in a volatile market. Through the first three quarters in 2025, the program paid out a net of $31 million, but according to Phil Plourd, president of Ever.Ag, that number will go up considerably once Q4 figures land, estimated at an additional $150 million.

Ken McCarty, co-owner of McCarty Family Farms in Rexford, Kan., says that in their experience DMC is less applicable to a farm of their size compared to DRP.

“We believe that it is important that all safety net programs are kept nimble enough to adjust to changing market dynamics and the evolution of the dairy industry,” he says.

Grinstead views risk management as a way to provide control points for the business, ensuring the farm survives the future. Since 2019, Grinstead has utilized DRP as a net-positive tool for Vir-Clar Farms, managing his strategy at least a year in advance to secure incremental margins. After experiencing a significant premium loss during the COVID-19 pandemic, he shifted to combining DRP with options to protect his financial downside while still participating in potential market rallies.

“We’re not looking for home runs,” he shares. “We’re looking for base hits and just kind of driving our business through some control points and being here for the next generation tomorrow.”

5 Pillars of the Dairy Revenue Protection Strategy

For producers, DRP offers five advantages DMC cannot match:

1. Class vs. Component Pricing. DRP allows producers to choose how their milk is valued. Class pricing (Class III and IV) is ideal for those focused on fluid volume. However, for the rising number of Jersey and high-component herds, component pricing is a game-changer. It allows producers to establish an insured price based on butterfat, protein and other solids.

2. Flexible Coverage Levels. Producers aren’t locked into a “one-size-fits-all” tier. They can cover up to 100% of their expected production at levels between 80% and 95%. This allows a producer to “buy what they need” based on their specific break-even points.

3. State-Level Indexing. DRP is not a national average; it is indexed to the state or region where the producer is located. This accounts for regional basis and production fluctuations, making the indemnity much more accurate to the producer’s actual loss.

4. Natural Market Protection. DRP is a pure market tool. It covers revenue loss caused by natural occurrences in market prices and yields. While it doesn’t cover the death of cattle or management errors, it provides a “floor” that allows a producer to keep doing business even when the global market turns sour.

5. The 2026 Evolution. The program is not stagnant. For the 2026 crop year, several key revisions are being implemented to protect the integrity of the program and the producer. This includes a new “Insured’s Certification Against Subsidy Capture,” ensuring the program remains a legitimate insurance tool rather than a speculative one. Most importantly for herd health, the 2026 revisions include language that considers animal disease a “natural disaster” event that can trigger coverage if it prevents a producer from marketing milk.

“We continue to see strong interest in DRP insurance, as it helps protect against falling milk prices regardless of what feed prices do,” Burgess shares. “It’s especially useful for producers with output of more than 6 million pounds annually who can’t fully cover their production with the DMC program.”

Even if a producer can cover all their milk with DMC, it is also a good idea to have a DRP policy because many times DRP allows them to lock in a higher milk price than what would be protected by DMC, she adds.

“For instance, in 2025, many DRP policies saw sizable claim payouts whereas DMC only had an 8 cent payout in December,” Burgess notes. “Both DMC and DRP are useful programs, but knowing the strengths and weaknesses of each is important to make sure you are using the right tool for the job.”

The sign-up period for the 2026 DMC is still open, but time is quickly running out. Producers have until Feb. 26 to lock in coverage, and current market conditions suggest payments can be expected throughout 2026.

One Week Remains for 2026 DMC Enrollment as Margin Pressure Builds

Wed, 18 Feb 2026 20:20:20 GMT

The sign-up period for 2026 Dairy Margin Coverage (DMC) is still open, but time is quickly running out. Producers have until Feb. 26 to lock in coverage, and current market conditions suggest payments can be expected throughout 2026.

Why DMC Matters in 2026

Milk prices have started the year on the weak side, and with more milk coming from U.S. farms, plus plenty of product available on the world market, margins are expected to stay tight for much of the year. Lower feed costs have limited some of the downside, but the gap between milk income and overall production expenses continues to be narrow.

Because of those squeezed margins, analysts say early 2026 DMC payments are likely, with estimates pointing to more than $1 per hundredweight in support from January through April, followed by smaller payments into July.

Expanded Coverage Now Available

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, reauthorized the DMC program through 2031 and made several updates intended to improve its usefulness and flexibility. The changes reflect how milk production and risk management needs have evolved, particularly for small- and mid-sized operations that rely on DMC as a foundational safety net.

These improvements include:

Higher Tier 1 coverage – Tier 1 production increase from 5 million lb. to 6 million lb., allowing more milk to be insured at the lower premium.
New production history – All operations must establish updated production histories based on the highest milk marketings from 2021, 2022 or 2023, while newer operations will use their first year of production data. Milk marketing statements or other documentation will be required.
Multiyear enrollment with discounts – Producers can lock in coverage for 2026–2031 and receive a 25% discount on premium fees.
Flexible coverage options – Multiple levels remain available, including a catastrophic option at a $100 administrative fee. USDA’s online dairy decision tool can help producers determine the best level of protection.

Your DMC Enrollment Checklist

With milk margins tightening and updated coverage options in place for 2026, producers may need to evaluate whether DMC fits into their overall risk management plans. This risk management plan is structured to provide payments when the margin between milk prices and feed costs falls below selected coverage levels and is commonly evaluated alongside tools such as Dairy Revenue Protection (DRP), Livestock Gross Margin (LGM) and futures or options strategies.

Before the enrollment deadline, producers should review the following items:

Verify Production History: Gather marketing statements from 2021, 2022 or 2023 to set your new baseline.
Evaluate Coverage Levels: Determine if the expanded 6 million lb. Tier 1 cap changes your strategy.
Compare Premium Costs: Weigh the 25% multiyear discount against your long-term cash flow goals.
Review Supplemental Tools: Consider how DMC works alongside Dairy Revenue Protection (DRP) or Livestock Gross Margin (LGM).
Assess Financial Goals: Determine how potential early-year payments fit into your 2026 budget.

How Do I Enroll in DMC?

To enroll in DMC, dairy producers must complete and submit an application to their local FSA office during the specified enrollment period, according to USDA. The application process includes providing production records and selecting the desired coverage level. Detailed enrollment instructions and deadlines are available through the local FSA office.

Dairy Faces a “Very Weird Situation,” Forcing Farmers to Rethink Revenue

Thu, 12 Feb 2026 17:27:19 GMT

Dairy farmers are standing on shaky ground. Milk checks are tight and input costs are up, but replacement heifers and beef-on-dairy calves are providing an unusually strong backstop. As Gregg Doud, president and CEO of the National Milk Producers Federation, puts it, dairy is in a “very weird situation” right now.

Beef-on-Dairy Helps Pay the Bills

With today’s market conditions, many dairy farmers are finding that the most valuable part of their operation is not in the parlor, but in the maternity pen.

“The milk check is not much,” Doud told “AgriTalk” host Chip Flory during Farm Journal’s 2026 Top Producer Summit. “But those calves are worth so much.”

In some regions, that beef-on-dairy value is staggering.

“The latest number I heard in the Northeast recently, a black day-old calf [is worth] $1,600,” Doud adds. “You talk to [dairy farmers] and they say, ‘We’re in the beef business now.’”

At a time when the milk check alone is not enough to carry the operation, beef-on-dairy has become a financial lifeline that is helping many farms stay profitable.

“Beef-on-dairy doesn’t have 100% penetration into the industry, but it’s close,” Doud says. “I would say it’s over 75% at this point.”

This shift is reshaping how farmers think about cow value, reproductive decisions and even culling strategies. A cow is no longer evaluated only on her milk production or longevity, but on the value of the calf she is carrying.

“If a cow is pregnant, she’s staying,” Doud adds. “The calves are worth too much to ignore.”

Fewer Replacements

That shift, however, comes with consequences for the future makeup of the herd.

With so many breedings going to beef, Doud says the number of replacement dairy heifers in the industry has dropped to levels that are noticeably short.

“The number of replacement dairy heifers is way below what it ought to be,” he says. “So, this is going to be interesting, and there could be a big swing in cow numbers at some point here.”

Doud notes the current reduction in replacement heifers is something the industry is watching closely.

Risk Management Remains Essential

As producers navigate all the shifting pieces in today’s market, Doud draws a firm line on risk management. In a margin environment like this, Dairy Margin Coverage (DMC) and Dairy Revenue Protection (DRP) are not optional tools in his mind. They are essential.

“The Dairy Margin Coverage program for dairy is something that I think everybody in agriculture needs to look at,” he says. “It kicks in when you need it.”

Although DMC has limits on how much milk can be covered at the highest level, Doud notes it still works well for most dairies. He follows that point with strong encouragement for producers to also consider DRP, explaining it offers another way to safeguard milk income by allowing farms to insure a portion of their future revenue against market swings.

“Every dairy farmer in America, my goodness, if you are not signed up for DMC and also DRP on the insurance side of the equation, get signed up for these things,” he adds.

In his view, these tools were designed specifically for moments like this, when margins are thin and markets are unpredictable.

Cautious Optimism in an Uncertain Market

Looking ahead, Doud acknowledges milk checks are likely to remain tight, but the value of beef-on-dairy calves is helping farms navigate a difficult margin environment.

With additional dairy processing capacity coming online and continued demand for protein, he is hopeful milk prices will improve. In the meantime, he views risk management tools and beef-on-dairy breeding decisions as practical safeguards for producers working through challenging market conditions.

Is Dairy Headed Into Another Down Year?

Mon, 22 Dec 2025 18:04:22 GMT

Milk prices remain flat heading into 2026, with no clear sign of a sustained recovery as strong supplies keep buyers on the sidelines.
Milk production continues to climb, driven by larger herds, higher output per cow and incentives from strong beef-on-dairy calf prices.
Demand is steady but not strong enough to significantly reduce inventories, keeping pressure on margins despite solid cheese and butter exports.

Dairy producers don’t need a futures chart to know conditions are challenging. Milk prices have leveled off, margins remain tight and the outlook offers little sign of quick improvement. According to dairy analyst Robin Schmahl of AgMarket.net, the industry is likely heading into another tough year without a clear driver for stronger prices.

Looking at the price structure, Schmahl says the market is basically flat out through the first quarter of 2026. What troubles him most is not just the level of prices but the lack of urgency from buyers.

“The buyers of cheese, buyers of butter and dairy products are not concerned about supplies,” he says. “So, they don’t have to be aggressive. They can just wait. That’s the bottom line.”

Milk supplies are abundant, and that’s weighing heavily on prices. Production continues to climb, with more cows in the herd and higher output per cow, leaving the market well-stocked and buyers in no rush to secure more milk.

“On the last milk production report, we’re running 3.7% higher than the previous year,” Schmahl notes. “We’ve got over 200,000 more cows, and those cows are producing around 20 lb. of milk more than last year. We have a lot of milk.”

Demand is Good, But Not Good Enough

On the demand side, the picture is more complicated. Cheese and butter markets have held steady and exports are providing some support, especially with U.S. prices remaining competitive globally.

However, even with these positives, demand isn’t strong enough to make a meaningful dent in the large milk surplus. Domestic consumption is steady rather than growing, and while exports help, they can’t fully absorb the extra supply that continues to build.

“Cheese demand has been steady and even picked up a little,” Schmahl says. “International demand is very strong and holding well, largely because U.S. prices remain lower than world prices.”

Butter tells a similar story.

“Butter plants are running seven days a week,” Schmahl adds. “Cream supplies are very large, and world butter prices are about a dollar higher than U.S. prices. That price gap has fueled strong butter exports.”

However, global signals aren’t offering much optimism. The Global Dairy Trade auction, which tracks international dairy prices, dropped another 4.4% in its latest update. That’s the ninth decline in a row, showing buyers around the world are pulling back. This means lower global prices make it harder to sell milk overseas and harder for the domestic market to work through the extra supply.

Even positive developments, like the return of whole milk to school lunch programs, are unlikely to be game changers near term. Still, Schmahl calls it “real positive news,” noting that when whole and 2% milk were removed in 2012, “consumption in the schools went down because students didn’t like the skim and 1%.”

“It’s looking like it will be a lower year price wise,” Schmahl adds. “Demand exists, but not at levels that can chew through inventories and turn the price tide.”

Why are Butterfat Premiums Disappearing?

Processors are changing their priorities when it comes to milk components. For years, farmers focused on breeding and feeding strategies to boost butterfat because it was in high demand and paid well. Now, processors are pulling back, and the premiums for higher butterfat have all but disappeared.

“We’ve seen record butterfat production for about a year,” Schmahl says. “For a long time, processors encouraged higher fat levels. Now they’re capping it — anything over 4.5% they’re not going to pay for.”

This cap affects producers who have invested in genetics, crossbreeding and feed strategies to increase milk components.

“What producers have worked toward for years is now becoming a disadvantage,” Schmahl says. “It seems like processors expect cows to adjust instantly, but that’s not realistic.”

This change takes away one of the few tools producers had to earn more for their milk without increasing output.

Is Beef-on-Dairy Changing the Game?

Even though the market doesn’t need more milk, dairy cow numbers continue to see an increase. One reason is the growing beef-on-dairy trend, which has changed how producers make culling decisions. Strong calf prices have created an incentive for farmers to keep cows that might otherwise be culled.

“We do need more beef,” Schmahl adds. “That demand pushed calf prices higher, which in turn drove up heifer prices, so dairy farmers have started to think differently. Instead of buying a $4,000 replacement heifer, they could keep a cow that produces less milk, breed her to a beef sire and sell the calf for around $1,000. Plus, that cow will produce another calf down the road.”

He describes the beef-on-dairy trend as a modified Black Swan event. While it hasn’t appeared suddenly, it’s still unprecedented for the industry. Because there’s no historical model to draw from, analysts are finding it difficult to predict its long-term impact on herd management and milk supply.

That uncertainty is part of what makes the current cycle so tricky. As long as a 3-day-old beef-on-dairy calf can fetch $800 to $1,000, producers have a strong incentive to hang on to older, lower-producing cows. The result is elevated cow numbers that keep milk flowing even when milk price signals would traditionally force a contraction.

Risk Management in a Flat Dairy Market

Schmahl says the biggest risk many dairies are taking going into 2026 is doing nothing.

“Producers don’t want to do anything, because they think we’re at the low,” he says. “It may stay here for a little bit, but the upside potential is there. I’m concerned … about what could happen in the first quarter, or maybe first half of the year if our production trajectory follows what it is.”

On milk price protection, Schmahl favors options over DRP at current levels.

“I firmly believe that a put option strategy is the best way to go,” he said. “With Dairy Revenue Protection (DRP), you automatically give up about 5% of your insured price —usually around 80¢. That means your floor starts lower than the current market.”

By comparison, he says a well-structured option plan can keep your protection closer to today’s price. On inputs, Schmahl advocates taking advantage of relatively cheap corn and soybean meal.

“You’ve got a lot of year ahead — to just guess the market is not a good way to manage risk,” he adds.

Pressure Persists, Opportunities Remain

Looking ahead, 2026 is shaping up to be another challenging year for dairy. Milk supplies remain strong, and prices are expected to stay under pressure, leaving producers with tight margins. However, there are still some bright spots.

Export demand for cheese and butter continues to provide support, and U.S. prices remain competitive globally. Domestic programs, like the return of whole milk to school lunches, could help boost consumption over time.

While the market isn’t signaling a quick turnaround, disciplined risk management and careful planning can help producers navigate the year ahead and position themselves for opportunities when conditions improve.

Navigate the Shift: U.S. Dairy Markets and the Impact of New FMMO Changes

Tue, 30 Sep 2025 11:38:19 GMT

U.S. milk output has been surging most of the year, bringing dairy prices to some of the lowest we’ve seen in years. USDA reports August 2025 saw an increase of more than 3% higher milk output than August of last year.

It is a perplexing issue with lower cow numbers. However, feed is cheap, and if there is one thing the American farmer is good at, it is creating efficiencies in every corner of their operation.

As a result of the abundance of milk supply, there have been new lows in nearly every sector of the dairy market — but most notably in butter, cheese and Nonfat Dry Milk (NDM). Butter fell below $2.00 per pound, something we have not seen in months, due to the higher cream supply and higher churning activity as of late.

Demand is steady domestically, but the supply of milk is more than we can use. Exports have been the bright light in the demand picture, as world demand is strong, but demand struggles to keep up with the national milk production rising the fastest pace we’ve seen in two years.

While markets struggle to find support, farmers have begun to adjust to the new changes in the Federal Milk Marketing Order (FMMO). It has been long awaited for the FMMO to get a new, modern facelift to reflect more of what we are seeing in dairy today by updating the old, outdated formulas. However, it did not come without costs for some farmers.

For others, such as farmers in the southeast, where fluid milk is usually a deficit in that region, the changes are favorable. For example, Class I Pricing has changed to the “higher-of” formula — which ties fluid milk prices to whichever is greater between Class III or Class IV. There have also been adjustments for location-specific premiums, which are meant to better reflect hauling and supply costs.

Processors saw a benefit in higher allowances for butter, cheese, nonfat dry milk and whey — which are supposed to reflect the updated manufacturing costs. Unfortunately for farmers, this translates into lower component values on their milk checks.

In the cheese pricing formula, they have removed the 500 lb. barrel price from Class III calculations, leaving only 40 lb. blocks as the sole reference price for cheese.

There have also been some changes in component assumptions. Protein and solids factors will increase. This is meant to align formulas more closely with today’s milk composition. These changes have been delayed until December 2025. This is to give risk management tools such as DRP insurance, contracting and hedging strategies some time to adjust or adapt before the new pricing structure roll out begins.

For the producers, the biggest impact seen so far is the immediate difference on their settlements, which have shown lower-than-expected returns under the updated system, especially if they are focused on components due to the new make allowances.

For the future, the shift in protein and solids should improve valuations. Producers shipping into fluid milk markets should stand to benefit from stronger Class I values and higher differentials. But today, it is clear changes in policies may help improve transparency and make calculations easier — but not always the best financially for the producers.

As far as where to go from here for the farmer, learn as much as you can about the new policy changes, how it affects your farm prices and talk with your marketing professionals about what needs to be done for hedging or insurance needs going forward.

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Class IV Climbs, Class III Slips as Butter Trading Hits Eight-Month High

Fri, 13 Jun 2025 21:45:41 GMT

The Q3 DRP deadline is here. Class IV futures rose today, while Class III oscillated between higher and lower, ultimately closing slightly down. If you need any last-minute coverage, Q3 Class III DRP features a $17.74 per hundredweight trigger price for around 15 cents. For Class IV, you can protect $18.44 per hundredweight for less than six cents. To add insurance, please reach out to your agent to get it booked before 9:00 AM CT Sunday.

Today’s Highlights from Ever.Ag’s Know Your Markets

The CME butter market moved on strong volume again, with 37 lots changing hands today – up two from Wednesday’s eight-month high of 35. That brought the full week total to 135, the busiest week since October. The spot price rose 2.5 cents to $2.5700 per pound. Spot blocks edged downward $0.0025 to close the week at $1.8375, while barrels dropped 1.5 cents to $1.8350. Fifteen loads of blocks and one barrel traded.
Class III futures slipped following the move lower on spot cheese, with second half contracts closing at $18.78 per hundredweight, a six-cent loss. The rise in CME butter gave strength to the Class IV curve. Third quarter futures rose to $19.41 per hundredweight, adding 15 cents.
Soybean contracts shot higher after reports the EPA is changing biofuel blending requirements for oil refiners. The July and November contracts each leapt 27.5 cents, settling at $10.6975 and $10.5475 per bushel, respectively. Corn also advanced following yesterday’s supportive WASDE, with July futures up six cents to $4.4450 per bushel.

Ever.Ag - The risk of loss trading commodity futures and options can be substantial. Investors should carefully consider the inherent risks in light of their financial condition. The information contained herein has been obtained from sources to be reliable, however, no independent verification has been made. The information contained herein is strictly the opinion of its author and not necessarily of Ever.Ag and is intended to be a solicitation. Past performance is not indicative of future results.

Rollins Says USDA Will Announce Application Process for $21 Billion in Disaster Aid Within Days

Wed, 07 May 2025 18:44:03 GMT

In her first hearing on Capitol Hill since the confirmation process earlier this year, Secretary Brooke Rollins faced the Senate Appropriations Committee on Tuesday, fielding questions on everything from USDA’s bold budget cuts and frozen funding to the fate of the nearly $21 billion in disaster aid.

Rollins fiercely defended the cuts, continuing to argue that it is a way to make USDA more effective and more efficient. She also told the committee that farmers will be able to sign up for the disaster aid by the end of May.

Congress approved the disaster aid on Dec. 21, 2024. While the $10 billion in Emergency Commodity Assistance Program (ECAP) was passed the same day, it was separate and came with a clear deadline on when USDA had to disperse those funds. In the hearing this week, Rollins admitted the disaster aid program has been more complicated to roll out.

“That one’s a little more complicated than the ECAP, the disaster or the emergency relief payments, but we’re really close and within a matter of days or weeks, certainly by the end of this month, that money will begin moving,” Rollins said on Tuesday.

The nearly $21 billion in disaster aid targets agricultural losses from natural disasters in 2023 and 2024, which includes:

Droughts
Hurricanes
Floods
Wildfires
And other extreme weather events.

Of those funds, $2 billion is earmarked for livestock losses attributed to droughts wildfires and floods. There is also an allocation of $220 million that will be distributed through block grants to smaller agricultural states with limited farm income and acreage.

“We are within days of announcing the application process,” Rollins said. “Of course, that’s a little more complicated because we don’t have the specifics, and it isn’t, as [Sen. John Hoeven, R-N.D.] mentioned, in North Dakota, 15,794 of your farmers and ranchers have received money through that first tranche, through the first $10 billion, the emergency aid. On the weather-related programs, that application opens in the next week or two. And we will be moving very, very quickly.”

.@SecRollins testifies before Congress: "When farmers prosper, rural America prospers." pic.twitter.com/rXwV12JPDD
— Rapid Response 47 (@RapidResponse47) May 6, 2025

According to Pro Farmer, the disaster aid is intended to cover losses in revenue, production quality, and infrastructure for crops, livestock and timber. And most of the aid is expected to be administered through USDA’s Emergency Relief Program (ERP), which has been used for similar disaster relief in previous years. However, USDA has indicated the new program will be more farmer-friendly than the Biden administration’s implementation of the last ag disaster funds.

Rollins says the rollout of the disaster aid funds is “a long time coming,” bacause it is related to disasters that happened as long as two years ago.

“And so ensuring that we get that out as quickly as we possibly can with the team that we have in place,” Rollins said. “I’m really proud of, I believe, how efficiently and how quickly the team moved out that first tranche. And I believe that you’ll see the same sort of efficiency and effectiveness with the second tranche, so it’s within the coming weeks.”

Rollins Fiercely Defends Cuts at USDA

Also in the hearing, Rollins defended recent budget and DOGE cuts, saying her team is eliminating what she called wasteful DEI spending, fraud and abuse in all USDA programs. She argued the plan is to rebuild USDA to put farmers first.

Rollins also discussed some frozen funds at the agency and when a review of them will be completed.

“We are working around the clock, going line by line, we’re down to the final 5 billion out of, I believe, almost 20 billion of frozen funds, but $5 billion is a lot of money,” Rollins said. “And when you think about that in terms of grant or contract and moving that out quickly, we’re very helpful to keep moving through that very, very quickly and have that done very soon.”

Rollins was also asked about the 15,000 USDA employees who have taken buyout offers from the federal government . Reports show that accounts for nearly USDA’s total workforece, and impacts farmer-facing agencies such as Natural Resources Conservation Service and Farm Service Agency.

“The 15,000 number, it is less than 15% of our total workforce,” Rollins said. “I realize that’s still a very, very big number. But I think it’s important to realize in the context that every year USDA, through attrition loses between 8,000 and 10,000 employees. So, it’s a massive government agency, but they’re refilled. Well, and that’s what we are looking to refill. The front liners, that’s I was talking about right now. So whether it’s FSA, APHIS, the Wildland Firefighters, those are through a memorandum I just signed, we are actively looking and recruiting to fill those positions that are integral to the efforts and the key front line.”

Senator Patty Murray, D-Wash., followed up and asked, “So, you let people go, and you’re looking for new people to fill the positions that they had experienced in?”

“We’re having those discussions right now,” Rollins said. “We are working with all of you around the country, in your states. We believe our firefighters are operationally ready for wildfire season. Our FSA offices, we are making things more efficient, but bringing on new people that could potentially be a game changer in those offices.”

The workforce reduction is part of the federal government’s current Deferred Resignation Program (DRP), which is the voluntary program that allows eligible federal employees to resign in advance while continuing to receive pay and benefits until Sept. 30.

Rollins then clarified and explained the 15,000 USDA employees who accepted the buyouts, weren’t employees who were fired, they were resignations.

“None of those people were fired,” she added. “So, if they want to come back, and if they were in a key position, then we would love to have that conversation.”

Rollins said the latest round of DRPs, which happened in April, USDA didn’t accept some of the resignations, specifically if those employees were in what Rollins called “key positions,” which includes APHIS, FSA, etc.

“We are very intentionally approaching this,” she said. “Have we done it perfectly? No. Any type of whole scale change, and big effort to basically realign an entire government agency is difficult. And we know that, and we know it hasn’t been perfect, but we’re working every day to solve for a lot of this, and I think we’re making a lot of really good progress.”

USDA Spends $400 Million a Day on Food Assistance Programs

The other hot button topic during the hearing was food assistance. The secretary pointed out USDA spends more than $400 million a day on food assistance programs and said ending COVID-era funding programs doesn’t mean defunding food assistance.

You can listen to her pointed comments in the video below.

USDA alone spends $400+ MILLION each day on food assistance programs.

Ending COVID-era funding programs doesn’t defund food assistance. It ensures we’re good stewards of taxpayer dollars. pic.twitter.com/3lT7Fu6or9
— Secretary Brooke Rollins (@SecRollins) May 6, 2025

Dairy Markets Slip as Cheese Prices Drop

Fri, 14 Mar 2025 21:10:20 GMT

Dairy markets finished the week on a downbeat. Spot cheese prices dipped back into the high $1.60s on persistent and heavy sell-side pressure. The move sent futures notably lower on the day. Second quarter Class III prices closed at $17.57 per hundredweight – knocking 42 cents off yesterday’s close but still finished 15 cents higher on the week. It’s the last day to buy Q2 DRP coverage with all paperwork to be signed by Sunday morning. Premium costs have moved notably lower in recent weeks, so if you need coverage, please reach out to your agent.

Today’s Highlights from Ever.Ag’s Know Your Markets

Cheese prices couldn’t hold on to yesterday’s gains. Blocks tumbled to $1.6925, falling more than 6 cents from the day before. Five lots traded. Barrels also dropped, down 4 cents to $1.6900 per pound with two lots trading. The spot NDM market lost a half cent, settling at $1.1550 per pound with two lots trading. Dry whey keeps at its losing streak, sliding to $0.4500 per pound, down $0.075 with one lot exchanged. Butter had the most active day in terms of volume, with seven lots trading. The price ticked up a quarter to $2.3425 per pound.

Nearby corn futures slid 8 cents to close the week at $4.4550 per bushel. Soybeans moved in the opposite direction, but the March contract couldn’t quite get to $10 per bushel, closing just shy at $9.9925 per bushel, up 2.5 cents on the day.

Despite ending the day higher, the S&P 500 had another losing week. In fact, on Thursday, it closed at its lowest level since September. Continued tariff talk brings uncertainty, and the market is not a fan. After hitting a record high on February 19, the S&P 500 now sits more than 10% below that peak.

Cheese Prices Rebound

Thu, 13 Mar 2025 21:56:35 GMT

Spot cheese continued to rebound today, with both blocks and barrels up into the $1.70s. That helped Q2 Class III price continue its climb, too, closing just shy of the $18.00-mark. Please remember that tomorrow (Friday, March 14) is the last day for Q2 DRP coverage, with all paperwork to be signed by Sunday morning. Premiums costs are inexpensive, so reach out to your agent if you need any final coverage.

Today’s Highlights from Ever.Ag’s Know Your Markets

CME cheese markets moved upward. Spot blocks climbed to $1.7350 per pound, up 3 cents, and barrels closed at $1.7300, 6 cents higher. Seven lots of blocks and four lots of barrels traded. Spot butter held at $2.3400 per pound with zero lots trading. NDM was also unchanged at $1.1600 per pound with no lots trading. Dry whey fell $0.0225 to $0.4575 per pound with three lots exchanged.

Dairy cow slaughter remains below year-ago levels, with 56,100 head culled the week ending March 1. That was down 6.2% from Week 9 in 2024. Dairy cattle slaughter was up slightly in the Northwest (+2.6%) and Mid-Atlantic (+2.5%) regions but was down significantly in the West (-20.1%) and Midwest (-8.3%). Over the past four weeks, weekly slaughter averaged 54,300 head, down 9.9% from the same period last year.

The cream market got a little tighter in the Midwest and Northeast as spring holiday demand approaches. USDA reports multiples in the Midwest at 105, up slightly from 104 last week. In the Northeast, it climbed to 110, up from 103 the week before. Both regions remain notably below last year and the five-year averages.

Navigating 2025: What Lies Ahead for the U.S. Dairy Industry?

Tue, 28 Jan 2025 14:00:00 GMT

As 2025 begins, the dairy industry finds itself navigating shifting trade dynamics, volatile markets, and evolving consumer preferences. Drawing on lessons from the past while addressing new challenges, the year holds both uncertainty and opportunity.

Speaking at the 2025 Dairy Strong Conference in Green Bay, Wis., Mike North, Principal of Risk Management, offered insights into what lies ahead for the dairy industry in the coming months.

Shifting Trade Dynamics

Trade relationships with key partners, such as Mexico and China, are set to play a crucial role in dairy demand. Mexico remains a top market for U.S. dairy products, particularly cheese, due to strong economic growth and cultural ties to dairy. “The reality of Mexico is they’re a little bit more well-rounded of a trade partner for us,” North said. “They’ve been an incredible partner for us, and that’s the one where we’re certainly going to be watching probably a little bit more closely as we look at the balances of supply and demand through 2025.”

Conversely, trade with China has been less predictable. Any fluctuations in Chinese demand could ripple through the U.S. dairy export market. Rising U.S. cheese prices could also pose challenges to global competitiveness. In 2024, lower domestic cheese prices helped drive record export volumes. However, if prices stay high compared to global competitors, exports could slow, leaving the industry more reliant on domestic demand to sustain milk prices.

Domestic Demand: A Mixed Bag

Domestically, the dairy industry faces both headwinds and opportunities. Cheese consumption at home has stagnated, and weak restaurant traffic continues to dampen overall demand. With over half of Americans’ food spending occurring outside the home, sluggish restaurant sales present a real challenge.

“Foot traffic at restaurants really hasn’t been that great since last spring,” North noted. People just haven’t been going out with the same amount of zeal that they had in the past. And 51% of the food dollar in America is spent out of the home. So, what happens at restaurants is very important to what comes through on dairy demand.”

However, the protein trend continues to offer promise. Products like protein shakes, bars, and high-protein snacks have driven a surge in demand for dairy-derived ingredients, including high-protein whey. This trend has significantly reduced whey inventories, driving up prices and providing a welcome boost to Class III milk checks. For every cent increase in whey prices, farmers see about a six-cent increase in milk prices, making this a critical area to monitor.

Processing Capacity: Opportunities and Risks

One of the biggest developments on the horizon is the expansion of dairy processing capacity. States like Wisconsin, South Dakota, and Texas are adding significant new cheese-making capabilities. By the end of 2025, these facilities are expected to contribute an additional 360 million pounds of cheese annually. This growth could create new demand for milk, offering opportunities for farmers in these regions to expand their operations.

“However, there’s obviously going to be some compromise along the way” North stated. “We don’t have enough animals to make all the milk to supply all the plants in the U.S. This is a good problem. So, we are likely to see some inefficient plants close and some plants not run at 100% capacity. But with all of this cheese potentially coming online, we have a real need for exports because we are going to be creating a lot of additional products.”

However, this added capacity comes with risks. If the additional cheese produced cannot find a market—whether domestically or through exports—it could lead to oversupply and downward pressure on milk prices.

Navigating the Year Ahead

The key to success in 2025 will be strategic decision-making. With fluctuating export demand, evolving consumer preferences, and new processing capacity coming online, dairy farmers must remain flexible and proactive. Consider leveraging risk management tools like Dairy Revenue Protection (DRP) to safeguard against price volatility.

While the road ahead may be uncertain, it is also full of opportunity. By staying focused on efficiency, innovation, and market awareness, dairy farmers can position themselves for a successful year.

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Milk Markets See Rising Volatility

Tue, 21 Jan 2025 18:50:20 GMT

Each year the volatility in the dairy markets seems to increase. Market participants need to be aware of more aspects of the market that have significant influences. One of the large influences this year is bird flu and the impact it has had and will have on milk production and cow numbers. The shortage of replacement heifers and high beef prices will have a substantial impact. Increased tariffs under the Trump administration may impact international demand. This list can be added to as the year progresses. The uncertainty of traders can enhance volatility as they trade on a short-term basis, which is termed as scalping the market for a quick profit if one develops. This reduces the buy-and-hold action of a market that is trending.

Volatility in futures is one thing but volatility in the spot market is another. The recent price movements in the block cheese price have been unprecedented. We have seen substantial moves in either direction that have resulted in substantial movements in milk futures. However, the daily price swings seen recently have been incredible. This has not resulted in much price change over time, but it has been a sight to behold. The volatility of this magnitude in the futures market is difficult to predict, but volatility in the spot market makes it impossible to predict. This can increase volatility as some traders step back waiting for the market to settle down. Fewer market participants allow for increased volatility.

The final rule on the amendments to the milk marketing orders was released last week after a lengthy process. These changes will not go into effect until June 1^st. These changes have been anticipated and will not create price volatility because of it. It will result in a different pricing structure that we all will need to adjust to. Now that these changes are known, the Risk Management Agency may be able to eventually release component pricing for the Dairy Revenue Protection (DRP) insurance program again. This has been a huge reason why component prices have not been released under the program. They did not want to release component prices when they were uncertain of risking the potential for indemnity payments or taking away indemnity payments once the changes were implemented. Hopefully, this will remove the uncertainty and allow the DRP insurance program to revert to the way it had been earlier when both class and component prices were released daily.

Robin Schmahl is a commodity broker with AgDairy, the dairy division of John Stewart & Associates Inc. (JSA). JSA is a full-service commodity brokerage firm based out of St. Joseph, MO. Robin’s office is located in Elkhart Lake, Wisconsin. Robin may be reached at 877-256-3253 or through the website www.agdairy.com .

The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in trading commodity futures and options on futures. It may not be suitable for everyone. This material has been prepared by an employee or agent of JSA and is in the nature of a solicitation. By accepting this communication, you acknowledge and agree that you are not, and will not rely solely on this communication for making trading decisions

Class III Futures Take a Hit

Fri, 13 Dec 2024 22:25:23 GMT

Futures were pressured lower after a less-than-impressive cash cheese market, despite the strong buy-side interest in Class III futures pre-cash. The first quarter settled under $20.00 per cwt, but remains at elevated levels when comparing prices experienced only 10 trading sessions ago. Butter prices impacted Class IV futures as sellers are still pushing the cash market to lows not experienced since December 2023. Both Class III and Class IV prices still offer good opportunities for last-day Q1 DRP coverage.

Today’s Highlights

After spending the week gradually easing lower, the CME butter market tumbled six cents to close at $2.4650 per pound. Eight lots traded. Spot dry whey continued its upward climb, pushing closer to the 80-cent mark and settling at $0.7925 per pound, up 2.5 cents. Five lots traded. Blocks also climbed, adding $0.0125 to reach $1.8000 per pound, with two loads changing hands. But barrels eased slightly to $1.7275 per pound, down a quarter cent, with one lot exchanged.
Even with spot blocks and whey climbing higher, Class III futures dropped, with Q1 contracts slipping to $19.88 per hundredweight, shedding 27 cents. Class IV also tumbled, settling down 20 cents at $20.60 per hundredweight.
Corn futures have shaken off any bump from USDA’s bullish WASDE report earlier in the week. December futures eased to $4.3000 per bushel, down $0.0175 on the last day of the contract. March slipped to $4.4200 per bushel, 1.5 cents lower. Soybeans also declined. The January contract decreased to $9.8825 per bushel, giving up 7.5 cents.

Class III Futures Hit the $20 Mark

Thu, 12 Dec 2024 22:28:24 GMT

Class III markets popped higher today, with January – March futures all settling above $20.00 per hundredweight. And it’s just in time, as the Q1 DRP deadline is coming tomorrow. If you need any more coverage, take a close look at today’s values. Today’s Q1 Class III DRP has a $19.14 trigger price for 21 cents, which is a level that would have triggered a claim in nine of the past 10 years. Class IV DRP comes with a $19.76 trigger price for 13 cents, which would have paid in eight of the past 10 years. At current feed prices, those levels should help ensure a positive margin for early next year.

Today’s Highlights

CME spot dry whey hit another milestone, adding $0.0175 to reach $0.7675 per pound, the highest level since February 2022. Spot cheddar prices also rose, with blocks settling at $1.7875 per pound, $0.0375 higher, and barrels finishing at $1.7300 per pound, a 5.5-cent gain. Volume: zero lots of whey, six loads of blocks and four lots of barrels.
Supported by upward momentum in spot cheese and whey, Class III and cheese futures jumped. The January Class III contract increased to $20.25 per hundredweight, up 73 cents. January “all cheese” futures climbed to $1.8750 per pound, taking on $0.0680.
Fluid bottling demands have reportedly eased, loosening spot milk supplies in the Upper Midwest. USDA reported spot prices in the region at $0.25 per hundredweight under class, down from +$0.50 last week, though up from -$1.50 last year and the five-year average of -$1.30. Meanwhile, cream is readily available in the region, bringing Midwest multiples to 124 this week, down from 125 last week and the five-year average of 128, and in line with last year’s 124.

Dry Whey Market Hits New Year High

Wed, 11 Dec 2024 22:08:41 GMT

Some recovery in Class III futures has come just in time for the Q1 2025 DRP deadline on Friday. Producers who still need coverage should take a close look with floors back over $18.50 for premiums under 20 cents. With the calendar heading into mid-December next week, the January pricing period kicks off. As of now, January Class III is pricing about $1.81 cheese and over 70-cent whey. At least on the cheese side, spot markets will need to gain ground over the next few weeks to support these levels.

Today’s Highlights

The CME dry whey market continues to hit new year-to-date highs, climbing two cents to settle at $0.7500 per pound. No lots traded. Spot blocks also advanced, rising to $1.7500 per pound, a two-cent gain. But barrels lost ground, easing to $1.6750 per pound, $0.0125 lower. Two lots of blocks and five loads of barrels changed hands. Butter prices dipped slightly, down a quarter cent to $2.5275 per pound. Trading was heavy at 14 loads. The NDM market was quiet.
The US NDM/SMP price of $1.38 per pound remains well above competitors New Zealand ($1.26) and the EU ($1.25). But cheese and butter are still more competitively priced. US cheese sits at $1.73 per pound, compared to $2.13 in New Zealand and $2.28 in Europe, while US butter’s $2.53 per pound is at a discount to $2.96 in New Zealand and $3.60 in the EU.
Inflation ticked higher in November, up 0.3% on the month and +2.7% year-over-year, compared to +0.2% and +2.6% in October. That was the biggest monthly increase since April, but was in line with analysts’ expectations. The food index climbed 0.4% versus October and +2.4% on the year, while grocery prices advanced 0.5% and +1.6%, and food-away-from-home prices lifted 0.3% and +3.6%.

U.S. Makes More Cheese and Butter than Last Year, Prices Climb

Wed, 04 Dec 2024 21:41:05 GMT

We saw strong follow through to yesterday’s gains in the Class III space on the heels of additional spot cheese recovery. The other component in Class III (whey) slipped some but remains above 70 cents. The Q1 Class III futures average bumped above $19, offering a look at $18 floors – producers light on coverage for early 2025 should take a hard look. While cheese is usually the focus, keep in mind any slip in whey could also knock Class III from these levels – every penny move in whey amounts to six cents in Class III (so even a 10-cent decline in whey would amount to $0.60 per hundredweight in Class III). There is no DRP today given release of the Dairy Products report, so watch tomorrow’s markets closely for opportunity, especially with the Q1 deadline approaching next week.

Today’s Highlights

CME cheddar markets continued yesterday’s climb. Blocks advanced to $1.7000 per pound, adding three cents, while barrels rose to $1.6675, $0.0175 higher. Three lots of blocks and four of barrels traded. Spot butter also stepped higher, adding $0.0175 to reach $2.5400 per pound, with 10 loads exchanged. The CME spot NDM market decreased just a half cent to $1.3700 per pound, but volume was heavy, with 15 loads changing hands.

US cheese, at $1.67 per pound, remains far below New Zealand ($2.13) and EU ($2.28) pricing. New Zealand’s butter prices dropped 5% on the week to $2.96 per pound, well below $3.80 in Europe, but still above US prices at $2.52. NDM/SMP is $1.26 in both New Zealand and the EU, just behind the US’s $1.38 per pound.

According to USDA’s October Dairy Products report, the US made more cheese and butter than last year. Total cheese production reached 1.226 billion pounds, up 1.0% (+11.8 million pounds) on the year, and butter output totaled 167.5 million pounds, up 3.1% (+5.0 million pounds) versus 2023. Combined NDM+SMP output dropped 9.0% (-16.5 million pounds) to 166.2 million pounds. Dry whey stocks and output were well below prior-year levels, giving an explanation for recent higher spot prices. Production totaled 62.7 million pounds, down 12.3% (-8.8 million pounds) on the year, while stocks reached 47.7 million pounds, 33.1% lower (-23.6 million pounds) than 2023.

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Better Cheese Prices Give Milk Markets a Needed Bump

Tue, 03 Dec 2024 22:47:41 GMT

Today’s spot market showed mostly positive activity, with cheese prices making notable gains. The Q1 futures market responded positively, climbing nearly 30 cents on average. Whey prices, which recently reached their highest levels since March 2022, also played a significant role in supporting the Class III market. This is another opportunity to clean up the rest of your Class III Q1 DRP as it closes next Friday.

Today’s Highlights

CME cheddar prices bounced back at today’s spot session. Spot blocks settled at $1.6700 per pound, $0.0325 higher, while barrels finished at $1.6500, up 4.5 cents. Three lots of each changed hands. Butter also moved upward to reach $2.5225 per pound, a gain of $0.0275, with six loads exchanged. On the other hand, CME spot NDM declined on the heels of a lower GDT SMP settlement. The market finished at $1.3750 per pound, down two cents, with four lots traded.
Prices declined at the latest GlobalDairyTrade event, with the exception of WMP, which rose 4.1% to reach $1.81 per pound. SMP eased 1.2% to $1.29 per pound. Cheddar: $2.13 per pound (-3.0%), mozzarella: $1.87 (-4.5%) and butter: $3.03 (down 4.7%, adjusted to 82% butterfat).
The increase in CME cheese gave Class III futures a bump. The January contract jumped to $18.78 per hundredweight, tacking on 42 cents, while February futures rose to $18.81, up 26 cents.

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‘Cheap’ Corn: Economists Encourage Producers to Pack the Bunkers and Plan Ahead

Wed, 28 Aug 2024 21:35:08 GMT

Experts are predicting that Dairy Margin Coverage (DMC) will average between $11.85/cwt and $12.20/cwt during 2024. If this projection holds true, it will mark the highest average margin for a calendar year under the DMC program and the highest since margin protection became the foundation of the federal safety net program for dairy in 2015. For some perspective, the DMC for 2023 averaged significantly lower, at $6.70/cwt.

Katie Burgess, dairy market advising director with Ever.Ag, says their model is also forecasting an annual margin around $12/cwt for 2024.

“Although that number is moving around a bit given all the recent volatility in milk prices,” she says. “Milk and grain futures are currently projecting that on-farm margins stay strong into 2025 – our model currently averages around $12/cwt for next year, too.”

With relatively ‘cheap’ corn prices, Dan Basse, president of AgResource Company, advises dairy producers to chop as much corn as possible and consider managing feed costs strategically. He specifically recommends purchasing December corn call options and selling puts before mid-September.

“We think that DMC margins hold, but at slightly lower levels,” Basse notes. “Feed prices should bottom in the next 30 days and trend higher into year-end on strong U.S. corn export demand.”

Expected Trends in Feed and Corn Prices
According to Basse, these trends suggest that the DMC could decline slightly due to rising feed costs, with the milk market holding within a broad range. This nuanced outlook on the feed market brings into focus the balance between managing input costs and maximizing output revenue for dairy producers.

“We doubt that September or December corn can trade too far below $3.50-$3.60 longer term support,” Basse says. “So, pack the bags, bunkers and bins with cheap feed. Note that we feel that soymeal prices can decline further – so this is more about rising corn than soybean meal.”

In essence, while corn prices are expected to increase, soymeal prices might continue to decline, thus requiring a vigilant approach to feed management for optimal cost efficiency.

Utilize Risk Management Tools
One thing that top dairy producers do is follow, understand and utilize risk management programs. Leland Kootstra with Frazier LLP recently told Peggy Coffeen, the host of UpLevel podcast, that producers spend too much time thinking about the cost of some of those [risk management] tools versus what that cost actually buys.”

Particularly, he notes the value of dairy-specific tools that limit exposure, like DMC and Dairy Revenue Protection (DRP).

“These operators have spent so much time, so much effort, so much money making sure that they are as efficient as possible, that they’re controlling as much of the volatility as they can,” he says. “Why would they expose themselves to volatility outside of their control?”

Burgess shares a few key points that producers should keep in mind:

Right now, futures are projecting strong margins into 2025 – but markets are volatile, so make sure to play some defense.
Feed costs are currently cheap – look for opportunities to lock in lower priced feed and take advantage of those markets this fall.
Most importantly, as feed costs are getting set for the year ahead, also consider protecting milk prices. DRP insurance is a great way to do so – you can put on floor under milk prices to protect the milk-over-feed margin that is available today. And, then if milk markets remain strong into next year, there’s still the opportunity to capture even larger margins.