A small milk price increase combined with mostly steady feed prices to boost the September 2016 U.S. average milk-income margin. The increase reduces the likelihood there will be any Margin Protection Program for Dairy (MPP-Dairy) indemnity payments for the September-October pay period.
USDA’s Farm Service Agency (FSA) calculated a September margin of $9.48 per hundredweight (cwt), up about 22 cents from the $9.26 per cwt margin in August. The July-August MPP-Dairy pay period average margin was $8.43 per cwt.
Milk price inches up
Although the increase was meager, the U.S. average all-milk price rose in September to $17.30 per cwt, the highest level of the year. The average is up 20 cents per cwt from August, but still 20 cents less than September 2015’s average of $17.50 per cwt (Table 1).
Among major dairy states, Florida and Virginia posted the largest month-to-month milk price increases, up $1.50 and $1.40 per cwt, respectively. Nine states saw milk prices increase 50 cents per cwt or more. Prices in five states (California, Idaho, Minnesota, South Dakota and Wisconsin) with lower Class I (fluid milk) utilization fell compared to August.
Florida had the highest average price for the September at $21.40 per cwt; California had the lowest at $15.74 per cwt.
Fourteen states had milk prices below a year earlier, with Michigan and Pennsylvania down $1 per cwt.
Through the first nine months of 2016, U.S. prices averaged $15.77 per cwt, about $1.13 (5 percent) less than the same period a year earlier.
Feed costs: Little change
Feed costs used in the MPP-Dairy margin calculation changed little from a month ago. The average U.S. price of corn rose a penny to $3.22 per bushel; soybean meal declined $2.85 per ton to $337.95; and alfalfa hay dipped $1 to $137 per ton.
Final September feed costs averaged $7.82 per cwt of milk nationally, down 2 cents per cwt from August (Table 2) and the lowest since February 2016.
Margin forecasts
Based on recent futures prices, Alan Zepp, risk management program manager with Pennsylvania's Center for Dairy Excellence, estimated margin projections for upcoming pay periods are as follows: September-October – $ 9.27 per cwt; November-December – $9.08 per cwt; January-June 2017 – $9.31 per cwt; and July-December 2017 – $10.08. Based on those preliminary estimates, there would be no MPP-Dairy indemnity payments through next year.
Zepp noted both 2014 and 2016 futures prices missed the mark on MPP-Dairy margin predictions.
“Futures markets are the best indicator of anticipated margin we have, but they aren’t absolute,” Zepp said.
MPP-Dairy reminders
Conditions can change. USDA extended the 2017 enrollment period to allow dairy producers time to see how the milk price/feed cost margin outlook develops before they make coverage decisions. The deadline to enroll in the 2017 MPP-Dairy program is Dec. 16 at USDA FSA offices.
September cull cow prices fall
With beef supplies growing, September U.S. cull cow prices fell to the lowest average since January, according to the USDA/NASS Ag Prices report.
September 2016 cull cow prices (beef and dairy combined) averaged $74.50 per cwt, down $6.10 from August and $29.50 per cwt less than September 2015.
Year-to-date, the cull cow price average is $78.92 per cwt, down $32.50 per cwt from January-September 2015. 
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Dave Natzke
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