MPP Forecast: February 2018
February 9, 2018
Margins under the dairy Margin Protection Program (MPP) averaged $9.71/cwt. for the six bimonthly periods during calendar year 2017. This was the second-highest average for a calendar year during the past decade, behind only the $13.30/cwt. average during 2014. The low annual average during those 10 years was $4.58/cwt in 2009.
The monthly USDA margin for December 2017 was $9.36/cwt., $1.03 lower than November’s monthly margin. Most of the decline was driven by a $0.90 reduction in the all-milk price, to $17.20/cwt. in December. On a per-hundredweight-of-milk basis, an increase in the corn price contributed a further $0.09 to the lower December margin, and a higher soybean meal price caused an additional $0.04 drop. Alfalfa hay prices were unchanged from November to December. The bimonthly MPP margin for November-December was $9.88/cwt.
The CME dairy and grain futures continue to indicate that the monthly MPP margin is on the verge of a steep drop, taking it below $8.00/cwt and possibly triggering program payments for those covered at higher margin levels during the first three, and possibly four, bimonthly periods of 2018. Most of the projected changes in the margin during the coming year will be due to a lower all-milk price, which could drop another $2.00/cwt from its December level by late winter and early spring.