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MPP Forecast: December

December 8, 2017

The monthly margins under the Margin Protection Program (MPP) were essentially the same for the two months of the most recent bimonthly period: $9.99/cwt for September and $10.00/cwt for October. The average margin for the September-October period was $9.996/cwt. The U.S. average all-milk price for October was $17.90/cwt, $0.10 higher than the September all-milk price. The MPP feed cost was $7.90/cwt for October, as reported by USDA’s Farm Service Agency (FSA), $0.09 higher than the feed cost for September. On a per-hundredweight-of-milk basis, the $0.09 feed cost increase was the net result of small changes in the feed cost components, which individually changed the formula calculation as follows: corn, -$0.01; soybean meal, $0.06; and alfalfa hay, $0.04.

The CME grain futures currently indicate that the monthly MPP feed cost will rise slowly from its current level through the end of next year, but remain below $8.70/cwt throughout that time. The CME dairy futures currently indicate that the all-milk price will remain below $16.50/cwt during at least the first half of 2018. Combined, the futures indicate that the MPP margin will drop below $8.00/cwt but remain above $7.50/cwt during the second, third and fourth bimonthly periods next year. The USDA MPP Decision Tool margin forecast for next year has moved a bit higher over the past month. As shown in the chart, the USDA tool projects that the MPP margin will remain above $8.00/cwt throughout 2018, with less than a 50-percent probability that it will fall below that level, based on the Nov. 30 CME futures settlements.

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.