If you've been watching the federal margin coverage numbers the way some of you watch weather radar, you already know the shape of the news: July's reading came in at $5.68 per hundredweight, the lowest since May 2020, down 56 cents from June. It's the kind of number that reads plainly on a chart and less plainly in a cash-flow spreadsheet, and we want to walk through why it moved.
What actually moved
The margin is milk price minus feed cost, and this time both sides leaned the wrong way at once. The U.S. average all-milk price dropped about 50 cents in July to $17.90 per hundredweight, continuing a slide that started in June, when the all-milk price had already fallen 80 cents from May. Export demand for cheese and skim milk powder has stayed reasonably healthy this year, but domestic milk supply has been running ahead of it, and that combination keeps a lid on the price side even when demand looks fine in isolation.
The feed side didn't offer much relief either. June's feed cost calculation actually ticked down slightly from May, helped mostly by softer soybean meal, but that dip reversed in July, with feed costs edging back up about six cents per hundredweight of milk. Put a falling milk price next to a feed cost that's flat-to-rising and the margin has nowhere to go but down, which is exactly what happened for two months running.
If you're penciling out the fall, don't assume July's number is a floor. Margins have moved unevenly all year, and several members on our pricing listserv have told us their own feed contracts — particularly for alfalfa sourced from anywhere touched by this year's western drought — are running tighter than the national feed-cost figure implies. National averages smooth over a lot of regional variation that shows up directly on your bill.
What this means for your case
For members selling finished cheese rather than raw milk, the read is a little different. A softer milk price can ease your cost basis on the way in, but it's not free money — retail cheese demand has held up well enough this year that most of you haven't needed to chase volume with price cuts, and we'd encourage you not to start now just because your own milk cost eased slightly. Track the trend monthly rather than reacting to any single reading; two soft months after a firmer spring is a trend worth watching, not yet a verdict on the rest of the year.
We'd also gently note: margin coverage decisions for next year's enrollment window are worth revisiting now, while this year's swings are fresh, rather than waiting for the fall enrollment crunch. Two consecutive months at the lowest levels since the spring of 2020 is not a normal reading, and it's worth asking whether your current coverage level still matches the risk you're actually carrying. If you want a second set of eyes on your coverage level heading into next year, our Standards Committee has fielded a few of these questions lately and can point you to the right worksheet.
The bigger picture is one we've been describing all year — a market where milk price and feed cost keep taking turns being the problem, while a lot of the world it sells into is still improvising around a resurgent wave of illness. We'll keep flagging the months that matter and skip the ones that don't.
The International Cheese Federation (ICF) and More Cheese are entirely fictional. This post is demonstration content created for MemberJunction. All people, organizations, events, courses, certifications, figures, and quotations in it are invented, and nothing here represents a real association, a real business, a real person, or real professional advice.