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.