The August U.S. average milk-income-over-feed-cost margin jumped to the highest level since last November, meaning there will be no Margin Protection Program for Dairy (MPP-Dairy) indemnity payments for the July-August pay period.
USDA’s Farm Service Agency (FSA) calculated an August margin of $9.26 per hundredweight (cwt), up $1.67 from the $7.59 per cwt margin in July.
Milk price continues rebound
The U.S. average milk price increased $1 in August to $17.10 per cwt, the highest since December 2015 (Table 1).
Minnesota and Wisconsin posted the largest month-to-month milk price increase, each up $1.40 per cwt compared to July. Washington producers had the smallest increase, up 40 cents per cwt. Fourteen states saw milk prices increase $1 per cwt or more.
Florida had the highest average price for the August at $19.90 per cwt; Michigan had the lowest at $15.60 per cwt.
Eight states had milk prices below a year earlier, with Kansas and Ohio unchanged.
Through the first eight months of 2016, U.S. prices averaged $15.58 per cwt, about $1.25 (7 percent) less than the same period a year earlier.
Feed costs down
Lower costs for corn ($3.21 per bushel), soybean meal ($340.80 per ton) and alfalfa hay ($138 per ton) contributed even more to the margin improvement (Table 2). Final feed costs averaged $7.84 per cwt nationally.
Combined with July factors, the milk income margin for the July-August pay period was $8.43 per cwt, above the highest insurable MPP-Dairy margin of $8 per cwt and the widest income-cost margin since November-December 2015.
Based on recent futures prices, Alan Zepp, risk management program manager with Pennsylvania's Center for Dairy Excellence, said margin projections for upcoming pay periods are: September-October – $ 9.49 per cwt; November-December – $10.14 per cwt; and about $10 per cwt for the first six months of 2017. Based on those preliminary estimates, there will be no MPP-Dairy indemnity payments through the first half of next year.
MPP-Dairy reminders
Conditions can change, and the 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.
Dairy farmers who have not yet paid their 2016 MPP-Dairy coverage premiums also received a short extension. The deadline was originally Sept. 1, but notification letters were not mailed until Sept. 16. The USDA extended the payment deadline until 30 days after farmers receive the notification letters.
Farmers in arrears after that date could see restricted MPP-Dairy coverage eligibility, loss of any potential indemnity payments and loss of the production history adjustment for 2017. 
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Dave Natzke
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