MPP Forecast: July
July 6, 2017
The monthly Margin Protection Program (MPP) feed cost for May was $8.09 per hundredweight based on corn and alfalfa hay prices reported last week by USDA’s National Agricultural Statistics Service (NASS), and soybean meal prices reported earlier by the department’s Agricultural Marketing Service (AMS). NASS also reported a 20-cent-per-hundredweight increase from April in the May U.S. average all-milk price, to $16.70 per hundredweight. Therefore, the monthly MPP margin for May was $8.61 per hundredweight.
The modest increase in the monthly all-milk price should be the beginning of a recovery that the current CME dairy futures markets collectively predict will top out at the end of this year at about the same price as when the year began, just under $19 per hundredweight. The milk price rise is being powered by increases in both Class III and Class IV prices, with most of that due to higher milkfat prices. Neither Class III nor Class IV skim prices are projected to rise much above their current levels through the end of the year, while domestic cheese stocks remain high and skim milk powder continues in oversupply globally.
The CME futures are currently projecting modest increases in corn prices into the harvest season and virtually flat prices for soybean meal through the end of the year. After falling for most of last year, the NASS alfalfa hay price has been increasing this year, from $128 per ton in January to $155 per ton in May. USDA’s current MPP margin forecast, based on the June 29 CME futures settlements, continues to project that the margin will remain well above $8 per hundredweight during 2017 with essentially no chance under current conditions that it will fall below that level.