Recent increases in both corn and soybean meal prices and expected declines in milk prices mean dairy margins will continue to be squeezed this summer.
USDA's April Agricultural Prices reportshows total ration costs jumped a few cents per hundredweight of milk produced in March compared to February. But those prices don't reflect the recent jump in corn prices, up 20¬¢/bu., and soybean meal, up $60/ton.
Using USDA's Margin Protection Program feed cost formula, those rising feed prices mean ration costs have climbed to $8.40/cwt of milk produced.That's an increase of 60¬¢/cwt, or about 8% over March costs.
The national March milk/feed margin came in at $7.47/cwt. The new, higher feed prices suggest that margin could fall to $6.90 and that's using the current $15.30/cwt All-Milk price. Class III futures are currently trading below $13, again suggesting the All-Milk price will erode below $15 in the coming weeks and months.
These low margins could trigger the largest Dairy Margin Protection Program indemnities in the program's two-year history. The last time any significant indemnities were triggered was March/April 2015, when the margin fell to $7.50/cwt.