cows in field

Pay and Feed Prices: July/August, 2020

By Ed Maltby, NODPA Executive Director

There is no recent independent data on retail sales of organic milk through USDA AMS, and no way of estimating the strength or weakness of the organic market at this critical time. The most recent figures published were for December 2019, which showed continued growth in Whole Milk (WM) sales at about 6.2% year-over-year, and a decrease in the Reduced Fat Milk (RFM) category of 5.1% over 2018, but with 2% RFM increasing sales by 2.6% year over year compared with 2018. December 2019 data were more positive in comparison with December 2018 with a 9.9% and 9.6% increase in sales of WM and 2% RFM respectively and a 5.7% increase in total organic milk products.

Estimated Total U.S. sales of organic fluid milk products -December 2019

Product Name


Change from:


Year to Date

Previous Year (2018)

Year to Date (2019)

(million pounds)


Organic Production Practice

Whole Milk





Reduced Fat Milk (2%)





Low Fat Milk (1%)





Fat Free Milk (Skim)





Flavored Fat-Reduced Milk





Other Fluid Milk products





Total Fat Reduced Milk





Total Organic Milk Products





In the absence of national data on sales from USDA AMS, there is the Northeast Federal Milk Marketing Order 1 (FMMO) which publishes utilization of organic milk in that area. The Northeast FMO 1 has the largest utilization of Class 1 milk in the US, nearly double the second highest Marketing Order, so is a good indication of organic retail sales nationally. In June 2020, Whole Milk (WM) utilization was down 15% over June 2019 with Reduced Fat Milk (RFM) dropping by 4%. In February, WM was up 7% and RFM was down 13%. Total utilization of organic milk in June 2020 was down 9% compared with June 2019. Year to date utilization of organic milk in the northeast is down 10%. The reasons behind these figures can only be conjecture as they represent two very different social and economic situations but the bottom line is that less organic milk is being utilized in the northeast at this time

The conventional market continues its erratic pandemic course. In the 6 months from November 2019 to April 2020, the national average All Milk Price dropped $6.60. There has been a rapidly rising price and a very large spread between Classes III and IV, and this will cause the largest negative Producer Price Differential (PPD) that we have ever seen under the Federal Orders which may stretch into the fall. A negative producer price differential reduces the mailbox milk price which could result in a loss to producers of up to $5 per hundred pounds. Cow numbers are down with no increase in milk production. Block cheese prices hit a high of over $3 and are now in the mid $2.50 range. Those that invested in margin insurance will see payments with a margin in May 2020 of $5.37.

Dairy Margin Coverage Program 2020


Corn ($/bu)

Blended Alfalfa Hay ($/ton)

Soybean Meal ($/ton)

All Milk ($/cwt)

Final Feed Costs for DMC($/cwt)

Milk Margin Above Feed Costs for DMC($/cwt)




































All in all, no one is happy on either the conventional market or organic, although the organic pay price has been static, stable and low. Most producers are surviving with a below cost pay price which, if it continues, will suck all of the equity out of the business. A handful of producers are heading to the grass fed market, hoping for a better outcome there but with fewer options and the complicated requirements of managing production and rations.

Danone continues to use a handler in Iowa, Kalona Farms, for their producer relations management. They continue to charge farmers for hauling at $0.30 per hundred pounds, bundling the premiums together to make it more difficult to achieve(so you have to have all of them perfect to get ANY quality premium), and are charging back to the farms $.30/cwt to cover the fees that coops charge them for inspections/testing. They are allowing a select number of producers to increase production.

Byrne Dairy is reported as negotiating with groups of producers who are dissatisfied with their current pay price and conditions. Byrne Dairy is reported as charging producers $1 per hundred for trucking but being easier on PI counts

Many producers are reporting increasing confidence in the performance of CROPP Cooperative under the leadership of the new CEO, Bob Kirchoff. It is reported that leadership is making a bona fide effort at improving communications and transparency with the members with a creative and skilled management team that reflects the need for a high level of business skills in an increasingly competitive market place. Reports are that the coop has gotten a good “lift” from COVID driven demand, experiencing a profitable quarter for the first time in years. Among some changes on the supply side CROPP has tentatively reduced the over-quota deduct to $10/cwt from $20/cwt, something that could revert back on very short notice. The CROPP board now has the discretion to set the return on member investment between 4% and 8% annually, rather than the guaranteed 8% return that producer owners long enjoyed on that investment.

On May 19th, the USDA announced details of direct payments to producers under the Coronavirus Food Assistance Program (CFAP). USDA confirmed that beginning May 26, 2020, the USDA’s Farm Service Agency (FSA) has been accepting applications from farmers whose commodity qualifies. USDA has decided that all of dairy as a commodity has had a 5 percent loss calculation and all dairy farmers, organic and conventional qualify for the payment. There is no need to prove any personal loss. The cut-off date is August 28th 2020. A single payment will be made based on a producer’s certification of milk production for the first quarter of calendar year 2020 multiplied by $4.71 per hundred weight. The second part of the payment is based a national adjustment to each producer’s production in the first quarter multiplied by $1.47 per hundred weight, for a total payment of $6.18 per hundred pounds. The first payment will be 80% = $4.94 per hundred pounds. As of June 3rd USDA has paid out $545 million in payments via the Coronavirus Food Distribution Program (CFAP), far below the eventual $16 billion in payments when totally completed. When the signup for payments started May 26, USDA Secretary Sonny Perdue said payouts would likely be made to farmers within seven to 10 days of a producer's application acceptance. Of the payments, $140.3 million have been made for non-specialty crops (corn, soybeans, etc.), $8.4 million in specialty crops, $267.8 million for livestock and $128.6 million for dairy. The program is designed to cover as many areas of production as possible, but, despite advocacy efforts, there is no provision for seasonal dairies and spring calving herds who are at their lowest level of production in the first quarter of the year. Perhaps some of the future payments will take into account these producers and other farmers that have mixed cropping. The issues are definitely in front of the decision makers at USDA.

The devastating and sad story of Trickling Spring is coming to a close with Philip Riehl, an accountant and the majority owner of Trickling Springs Creamery, admitting he ran a long-running Ponzi scheme that preyed on hundreds of Amish and Mennonite investors. He pleaded guilty in February to securities and wire fraud and conspiracy and was sentenced on 7/23/2020 to 10 years in federal prison. Chambersburg-based Trickling Springs Creamery opened in 2001 and produced milk, cream, butter, ice cream, yogurt and cheese. The dairy’s products were sold up and down the East Coast. Court documents said Riehl lured investors to a fund that made most of its loans to Trickling Springs and paid off older investors with money from new investors. He and a co-conspirator also sold promissory notes in an effort to prop up the struggling creamery, lying to investors that it was profitable when in reality it was losing money, according to court documents. The business abruptly closed its doors last fall. Associated Press reported this written comment from U.S. Attorney William McSwain “The people who invested their money, sometimes their entire life’s savings, with Philip Riehl believed implicitly that they could trust him because he was one of their own. Riehl preyed upon that trust, swindling them out of tens of millions of dollars in an effort to keep his creamery business from going under.” A federal judge ordered Riehl to pay restitution, though authorities acknowledged that Riehl’s victims won’t be made whole.

Trade activity on organic corn and soybeans has been light as demand has slowed with the closure of meat packing plants. Slaughter of organic poultry and beef has been slowed down with the closure of the slaughter and packing plants, and demand for organic grain has been affected by retention of animals and lack of space to rear replacements. The consequences of the COVID 19 pandemic will also affect the level of imports. Prices have remained stable at $7 per bushel for organic corn and $19 per bushel for organic soybeans for feed. Soybean meal prices are also on the rise, moving north of the $800 per ton level with transactions for the third quarter.

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