By  E. W. Lang

Class III Milk Futures for calendar 2022 average $19.55 per cwt., a gain of 53 cents for the week's trading on the CME.  Class IV Futures for 2022 average $20.20 for a gain of seventy cents.  Spot loads of milk needing a home are trading from Class III to one dollar over Class.  Block cheese gained one cent for the week, barrels gained eight and butter gained 12 cents per lb.  The Class III Milk-Feed Index for 2022 averages just over $9 per cwt., which would be historically low-normal, owing to strong corn and soy prices. 

Milk production has been down in Europe, and their cheese prices are running 30 or so cents over ours in the U.S.  International shipping, however, is still congested at ports and energy prices remain a burden to producers and consumers, rich and poor, young and old.

Dairy Margin Coverage (DMC) 2022 is open for sign up at your local USDA Farm Service Agency (FSA) office.  There are some changes to the program.  Producers will have to provide their actual 2019 milk production to the FSA, and most milk buyers will provide that number to their producers.  There seems to be a supplemental DMC payment to producers for 75% of the difference between their actual 2019 production and their DMC production history, IFF their DMC production history is less than 5 million pounds.  The supplemental payment is retroactive to 1-1-2021 and will be in effect for 2022 and 2023. 

Another change in the USDA milk subsidy is that the hay price component will use all excellent quality hay values, rather than medium quality.  This will be retroactive to January 2020, and USDA expects to cash out farmers for this yet this year.  I wouldn't count on this, however, as two weeks with a holiday are six or eight weeks at government speed for something like this that isn't a priority or an emergency.  

While we're on the subject of milk subsidies and delays in general, the USDA Pandemic Market Volatility Assistance Program was intended to distribute money to farmers by December 31, via their milk cooperatives or handlers.  The USDA, however, has not yet given the milk handlers any money to distribute, so don't count on that before the new year, if then. 

There are a couple of factors involved in these delays, in addition to what can be attributed to the size and nature of the federal government.  Specifically, voting milk producers are a non-factor in almost all congressional districts, and there are no congressional elections for another 11 months.  Also, stronger milk prices of the last month or so may prompt USDA to view milk subsidies as less urgent, such that taxpayer funding and human efforts are directed elsewhere for the time being.  

Note here that USDA milk subsidies generally end at the 240th cow in each herd, given the five-million lbs. of milk that are generally covered.  Most 240 cow herds don't produce a tanker a day of milk, so location from a milk plant continues to be cause for concern over time for many producers.

Driving a milk truck around from farm to farm to get a load can be as taxing and rigorous as actually milking cows.  Most professional drivers can find fewer headaches hauling something other than raw milk from multiple farms.  Milk cooperatives and private buyers are limiting more producers' ability to produce more milk with each passing day. No, or almost no, one wants to take on a new milk producer, particularly if they can't turn out a full tanker every day at a distance that is close by. 

All of this leads to the question, "Who shall haul the cows' milk, who will drive the truck?  Who will read the dip stick and in-snow not get stuck?"  I Sondheimed that to a familiar hymn, mostly for my own amusement.

Anyway, for producers on the fence about staying in and getting out, all of this needs to be considered in their decision.  Milk subsidies don't keep everyone in business, but they do usually offer producers time to get out in an orderly fashion.  The $9 per cwt. margin I mentioned earlier is with $19.55 milk.  There are few dairy farms of small to modest size that can enjoy significant return to labour, management and capital with a $9 or $10 margin, as that comes out to minimum wage at best, and a life lived on capital depreciation.