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May 31, 2018

April Dairy Margin Lowest In Almost Two Years

 |  By: Jim Dickrell

The April dairy milk-feed margin, calculated by USDA in its Margin Protection Program, came in at $6.62/cwt. This is the lowest margin since June 2016, when the margin was $5.75.


In the April calculation, the all-milk price came in at $15.80/cwt, 20¢ higher than in March. But feed costs were also up. Corn was at $3.58/bu, up 7¢ from March; alfalfa hay was at $183/ton, up $17, and soybean meal was at $386/ton, up $6.


Two years ago, milk was $1/cwt lower, and corn and soybean meal were higher. That combination resulted in the lower margin.


Dairy farmers have until tomorrow to sign up for the 2018 Margin Protection Program at their Farm Service Agency offices. Even if farmers had signed up for the program last fall, they must do so again because of changes to the program made by Congress this winter. For example, Congress reduced premiums for Tier 1 production for the first 5 million pounds of production history. For example, premiums for $8 coverage have been reduced to 14.2¢/cwt for this year. Previously, that premium had been 47.5¢.


Note: MPP premiums for 2018 are due Sept. 4. “Premiums will not be deducted from MPP payments,” says Wayne Maloney, a USDA Farm Service Agency public affairs specialist. “The producer will receive his/her full payment and they don’t have to pay their premium until Sept. 4.”


Based on current futures market prices, it appears dairy margins will drop below $6 in May and June and enter the range of levels seen in 2016. This suggests farmers could be eligible for indemnities for six of the first seven months of 2017, with a couple of months paying out more than $2 if $8 coverage is taken. Note, however, that MPP indemnity payments will be subject to sequestration at the rate of 6.6%.


For more information on Dairy MPP, click here.


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