Milk splash.
August 5, 2020

Milk/Feed Margin $9.99 in June

 |  By: Jim Dickrell

The United States Department of Agriculture released its estimation of the milk/feed margin this week for June, coming in just a penny shy of $10/cwt.

As a result, there will be no Dairy Margin Coverage (DMC) insurance indemnity for June. In May, the milk/feed margin of just $5.37 triggered a DMC payment of $4.13/cwt. The April indemnity was $3.47.

The biggest reason for the jump in margin came from skyrocketing milk prices. The June national all-milk price came in at $18.10, the highest level since March. The all-milk price cratered at $13.60/cwt in May, down from $14.40 in April.

And while milk prices were up $4 to $5 across the nation, they did not increase as much as expected due to negative Producer Price Differentials and massive depooling in most Federal Milk Marketing Orders which base prices on components. The California all-milk price in June did come in at the $18.10 national average. But Wisconsin was 20₵/cwt below and Michigan’s June all-milk price was just $16.90.

In any event, the June jump in milk/feed margin was the largest in history. Feed costs have also steadily declined since spring. They peaked at $8.88 in January, were down 50₵ in April, and have declined another 40₵ since. Estimated feed costs in June were $8.11/cwt. Corn prices are the biggest reason for the feed cost decline, though soybean meal has also weakened.

Concerns over the continuing COVID-19 pandemic, a prolonged recession and weakened consumer purchasing power all combine to make the fall and winter market outlook uncertain. Weakness in milk prices later this year could again trigger DMC indemnity payments.