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For US dairy farmers, the peak in milk price is already over
Europe is by no means the only continent with high milk prices. Due to low milk production worldwide, milk prices have risen almost everywhere and thus the income of dairy farmers. American dairy farmers have already passed the peak in payments for several months.
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In May, the so-called all milk price, the average price for all milks combined, US $27,30 per pound. At the current exchange rate, that is roughly €60,00 per 100 kilos. Since May, the price has gradually fallen again. The United States Department of Agriculture (USDA) estimates that the average US milk price this year will be $25,20 per pound, or about $55 per 100 kilograms.
Best milk price since 2014
That is the best milk price since 2014 and a lot more than has been received in recent years. Only in 2019 did the milk price exceed $18,00 per pound. Now milk price alone doesn't say much. After all, it's about what's left after paying all the bills. That is why in the US a lot of attention is paid to the milk/feed ratio, because feed costs hit the hardest. The milk/feed ratio mentioned was highest in January with a factor of 2.20. At that time, the milk price was not yet at a record high, but neither were the feed costs. Since then, this indicator has steadily deteriorated.
This was due to the deteriorated ratio, but also mainly due to the drought in large parts of the country.
DMC Margin Protector
Yet there is still more left for American dairy farmers and their families than in previous years. Last year, premiums were paid for ten consecutive months to dairy farmers who had insured their income through the Dairy Margin Coverage (DMC) program. A total of $1,2 billion in premiums was paid out at the time, because otherwise dairy farmers would not stay out of the red. Dairy farmers are not expected to have to rely on this margin protector this year.
Whether that will be the case again next year remains to be seen. The USDA estimates that the US milk price will be around $22,50 per 100 pounds next year, or just under $50 per 100 kilos. If the feed costs are also slightly lower, most companies can manage with their market income. If not, they will have to call on the DMC again. This cannot be done automatically and for free. Those who want to participate must first pay an insurance premium to the USDA. Dairy farmers can enter at three levels.