By  E. W. Lang

The average of Class III Milk Futures for the rest of this year gained 65 cents this week.  They run from $20.57 per cwt to $22.76.  Average on Class IV Futures for the same time gained $1.15 per cwt. and run from $21.65 in December 2022 to dang near $25 in April 2022.  The Milk-Feed Indices for the rest of 2022 average $10 plus small change.  For milk producers who grow their own feed on land that's paid for, this is a fairly profitable level, even with burdensome costs for fuel, fertilizer, seed, labour, tractors, planting and tillage equipment, and basically everything else.

If someone figures everything in, then his or her return to management, labour and capital is still pretty modest if they actually use current land values.  In Iowa that's rent of something on the order of $5+ per point of Corn Suitability Rating 2 (CSR2) right now.   The profit in milking is mostly from land ownership, actually, and there have been some (many) milk producers sell or borrow against land to keep cows in the free stalls these last few years.  This is not sustainable, much as I dislike that word.   It's wise to think about the different margins as they apply to the dairy enterprise vs. crop production vs. being a landlord with a full-time job.  

Just think how much you could make per hour to drive a milk truck?  You would have to pass a drug test, get to work on time with a good attitude, be clean and precise taking samples, etc., and be a safe, capable driver.  A lot of current dairy farmers would fit this bill with little effort.   This still allows you to be part of the culture and community, while still getting to see the daily the rigors and challenges of those still milking 2X, seven days.  A job can be pretty inviting, particularly if your land rental income will make interest and principal at the bank.    

Butter is $2.75 per lb., the highest we've seen since April 2014, just like non-fat dry milk at $1.90 per lb.  Block and barrel cheese are both at $1.91, up a cent or so this week.

USDA has extended the sign up for Dairy Margin Coverage (DMC) until March 25, since participation for 2022 is only half of 2021.  This low participation rate makes me wonder, "What are people thinking about?"

It costs 15 cents to guarantee yourself a $9.50 milk over corn, soy and hay profit margin.  It's human nature that many who don't sign up for DMC will be among those complaining first and loudest about $16 milk, $6 corn and $650 bean meal in a few months, should that happen.    

For people milking 30 to 300 cows, there are few things more mitigating than a taxpayer-subsidized minimum on income over feed cost.   Not understanding and thinking about the merits of DMC participation is on par with not understanding and thinking about continued borrowing against real estate to keep the vacuum pump running.