MPP Forecast: April
April 5, 2018
The monthly margin under the Margin Protection Program (MPP) for February 2018 was $6.88/cwt., $1.23/cwt. less than the margin a month earlier. This was the third monthly drop of more than $1.00 in the MPP margin. The two previous ones, in December and January, were driven mostly by lower milk prices. The further drop from January to February was split more evenly between a lower all-milk price and an increase in the formula’s determination of feed costs. Most of the feed cost increase for February, on a per-hundredweight-of-milk basis, was due to higher soybean meal prices. All three components of the MPP feed cost formula rose from January to February.
The USDA MPP Decision Tool has not yet been updated to show monthly margins following enactment of the Bipartisan Budget Act of 2018 earlier this year, which changed the frequency of MPP payments from bimonthly to monthly. The bimonthly margins the tool still projects, based on the March 27 CME dairy and grain futures settlement prices, are shown in the accompanying graph. They average $7.76/cwt. for all 12 months of 2018. They indicate that, again based on the March 27 futures, purchasing buy-up coverage at the $8.00/cwt. level would yield net payments totaling $0.33/cwt. after deducting the new, substantially lower premium costs for milk covered up to 5 million pounds of production history during all of 2018. MPP buy-up premiums were made more affordable by the Budget Act, which also directs USDA to re-open MPP sign-up for 2018 coverage.
USDA’s MPP margin forecasts are updated daily online. NMPF’s Future for Dairy website offers a variety of educational resources to help farmers make better use of the program.