Annual growth of total domestic use of milk in all dairy products turned positive during December–February, following several rolling three-month periods of falling use when retail dairy price inflation was peaking. That trend is fading as the Consumer Prices Indices for most dairy products have begun to fall, rapidly lowering their year-over-year CPI changes.
This resurgence in demand is coming at a challenging time for dairy margins. Milk production growth remains below 1 percent, and milk solids production growth was just two-tenths of a percent higher during the three-month period that ended in February. This, combined with the previous demand weakness, has sent wholesale dairy prices down considerably from their highs of last spring and summer. And that’s sent the Dairy Margin Coverage margin into the low $6/cwt territory, as feed costs have not followed milk prices down. Fewer than one in six of the monthly margins have been lower since 2020, when the current DMC feed cost formula began to use only premium alfalfa hay.
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