The monthly margin under the Dairy Margin Coverage (DMC) program dropped by $3.09 per cwt in November to $8.78 per cwt in December, mostly driven by lower milk prices, generating payments to producers under the USDA’s flagship risk-management program.
The all-milk price declined by $2.80 per cwt for the month, mostly because of a substantially lower December cheese price. The DMC margin was further lowered by a $0.29 per cwt boost in the feed cost added to it. On a per hundredweight of milk basis, the higher feed cost consisted of cost increases of 19 cents, 7 cents and 3 cents for corn, soybean meal, and alfalfa hay, respectively.
The December margin will generate a payment of $0.72 per cwt for $9.50 per cwt coverage that month; for the year, average DMC payments were $0.73 per cwt per month.
Current futures prices indicate that the monthly all-milk price in 2021 won’t rise above the December level until late summer, while corn and soybean meal prices will remain above December levels at least that long. That means monthly DMC payments will remain above the 2020 average for many months to come.