The first half of the May-June 2016 Margin Protection Program for Dairy (MPP-Dairy) pay period calculation is in, and it’s ugly. Lower milk prices combined with higher feed costs to send the May national average income margin down more than $1 per hundredweight from April, to just $5.77 per hundredweight.
At $14.50 per hundredweight, the May 2016 milk price continued to slide, down $.50 from April. In contrast, feed costs averaged $8.73 per hundredweight for the month, up $.56 per hundredweight.
Feed costs were pushed higher by a $73 per ton jump in soybean meal (to $376 per ton) and a $.10 per bushel increase in the corn price (to $3.68 per bushel), offsetting a $6 decline for alfalfa hay (to $147 per ton).
See historical factors used in the calculation.
The May 2016 income margin is down $1.06 per hundredweight from April, nearly $10 per hundredweight less than October 2014’s margin, and the lowest in the program’s short history.
The May estimates are the first half of factors used to determine indemnity payments for the May-June MPP-Dairy pay period. The June portion of the calculations will be released July 29.
Depending on where June income margins land, about 4,425 dairy herds have margins insured at $6 or higher, about 19 percent of the 23,328 total MPP-Dairy participants.
U.S. average milk price should be nearing the bottom
The U.S. average all-milk price fell to the lowest level since October 2009, according to the USDA-NASS ag prices report, released June 29.
USDA estimated the May 2016 U.S. average all-milk price at $14.50 per hundredweight, down $.50 from April and $2.30 less than May 2015’s average of $16.80 per hundredweight.
Compared with a year earlier, average prices were down $3 per hundredweight or more in Minnesota, South Dakota and Wisconsin (Table 1).
Through the first five months of the year, 2016 prices averaged $15.32 per hundredweight, about $1.54 less than the same period a year earlier.
Improvement coming
Based on projections from the Program on Dairy Markets and Policy, MPP-Dairy margins look to have hit bottom in May, with current milk futures prices pointing toward improvement through the end of 2016.
Although signs of improvement dimmed a little on the final Chicago Mercantile Exchange (CME) trading day of June, prices still ended the month well above where they began. August-December 2016 CME Class III milk prices futures averaged $16.26 per hundredweight on June 30, compared with $14.56 per hundredweight on May 31.
May cull cow prices down
U.S. average cull cow prices declined slightly in May, falling back after three consecutive monthly increases, according to the USDA-NASS ag prices report.
May 2016 cull cow prices (beef and dairy combined) averaged $79.60 per hundredweight, down $1.90 from April and $34.40 per hundredweight less than May 2015.
Through June 18, dairy cow slaughter was running about 18,000 head behind the pace set a year earlier. PD
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Dave Natzke
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