Lower U.S. soybean meal and alfalfa hay prices weren’t enough to offset lower January 2016 milk prices, squeezing dairy producers’ income under USDA’s Margin Protection Program for Dairy (MPP-Dairy) formula. 

Natzke dave
Editor / Progressive Dairy

Producers will have to wait another month to see if the tightening margins trigger an indemnity payment for January-February milk.

USDA’s Farm Service Agency (FSA) announced a January 2016 MPP-Dairy margin of about $8.10/cwt., down about $1.00/cwt. from December 2015.

Based on current projections by the Program on Dairy Markets and Policy, MPP-Dairy margins could dip to near $7.00/cwt. by April 2016, before trending higher later in the year.

January margins tightened due to a $1.10/cwt. decline in the U.S. average milk price. Alfalfa hay prices dipped slightly, and the soybean meal price was down more than $10/ton. The average corn price rose a penny.


January margin factors

• Corn: $3.66/bushel, up 1¢ from December

• Soybean meal: $279.56/ton, down $10.22/ton

• Alfalfa hay: $147/ton, $3/ton

• Final feed costs: $7.995/cwt., down about 10.5¢/cwt. from December.

• All-milk price: $16.10/cwt., down $1.10/cwt.

• Milk margin minus feed costs: $8.105/cwt., down 99.5¢/cwt. from December.

See historical factors used in the calculation.

State differences

dairy margins individual states 2016

USDA uses national average milk, corn and alfalfa hay prices, along with a central soybean meal price, to calculate the monthly national MPP-Dairy income margin.

It's difficult to drill down into regional and state margins based on USDA data, since milk prices are averaged for 23 states, average alfalfa hay prices are reported for 18 of those states, and corn prices are reported for 12 of the major dairy states. Alfalfa hay, corn and milk prices are reported for 11 common states. And, a single soybean meal price is used for all states.

Individual state margins for January 2016, using the MPP-Dairy formula and state prices for corn, alfalfa hay and milk, range from a high of $9.97/cwt. in South Dakota to a low of $6.79/cwt. in Michigan, a difference of $3.18/cwt., according to Progressive Dairyman calculations. PD