MPP Forecast: October
October 18, 2017
USDA’s Farm Service Agency reported that the monthly Margin Protection Program (MPP) feed cost for August was $7.73/cwt. The feed cost in the MPP is based on corn and alfalfa hay prices reported by USDA’s National Agricultural Statistics Service (NASS) and soybean meal prices reported by the department’s Agricultural Marketing Service. All three feed cost components in the formula were down significantly from their July levels, which cut the August feed cost price from July’s number by $0.49/cwt. NASS also reported that the U.S. average all-milk price was $18.00/cwt. in August, $0.70/cwt. higher than the July all-milk price. The monthly MPP margin for August therefore rose by $1.19/cwt. to $10.27/cwt. from July’s margin of $9.08/cwt. The bimonthly margin average for the July-August period was $9.67/cwt.
The CME 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 $9.00/cwt. throughout that time period. The CME dairy futures currently suggest that the all-milk price will decline slowly from its current level but remain mostly above $17/cwt. through the end of next year. Combined, the futures currently indicate little probability that the MPP margin will drop below $8.00. As shown in the accompanying chart, the USDA MPP Decision Tool projects that the MPP margin will remain well above $8/cwt. through 2018, based on the Sept. 29 CME futures settlements.