Digest highlights
- August 2022 Class I base price remains above $25
- Vitaliano: Dairy snapshot as second half 2022 gets underway
- Dairy cull cow marketing steady in June
- World Dairy Expo to feature dairy policy seminar
- Seven named to fluid milk promotion board
- Dairy product inventories large
August 2022 Class I base price remains above $25
Although down slightly from June-July’s record high, the Federal Milk Marketing Order (FMMO) advanced Class I base price is above $25 per hundredweight (cwt) for a fourth consecutive month in August. Monthly calculations will also likely bring the “Class I mover” debate back to the surface.
At $25.13 per cwt, the August 2022 Class I base is down 74 cents from July but still $8.23 above August 2021. The 2022 seven-month average is $23.87 per cwt, up $7.48 from the January-August 2021 average of $16.39 cwt and continues to be the highest average for that period on record.
Class I zone differentials are added to the base price at principle pricing points to determine the actual Class I price in each FMMO. With those additions, August 2022 Class I prices will average approximately $27.95 per cwt across all FMMOs, ranging from a high of $30.53 per cwt in the Florida FMMO 6 to a low of $26.93 per cwt in the Upper Midwest FMMO 30.
Even with the small decline in the Class I base price, the spread in the monthly advanced Class III skim milk pricing factor ($11.19 per cwt) and advanced Class IV skim milk pricing factor ($14.83 per cwt) widened in August to $3.64.
Based on Progressive Dairy calculations, the Class I mover calculated under the “higher-of” formula would have resulted in a Class I base price of $26.17 per cwt, $1.04 more than the actual price determined using the “average-of plus 74 cents” formula.
Vitaliano: 'Unusual factors' driving second half of 2022
Both dairy supply and demand are being driven by unusual factors starting the second half of 2022, notes National Milk Producers Federation’s (NMPF) Peter Vitaliano, summarizing markets in the July 2022 Dairy Management Inc./National Milk Producers Federation Dairy Market Report.
Severe cost inflation and limited availability affected virtually all inputs necessary to produce milk, keeping a tight lid on milk production growth and generating record-high milk prices. Now, spiking retail prices are starting to soften domestic consumption, pressuring wholesale prices. It’s too early to gauge the probable longer-term impact that inflation may have on dairy demand, since retail price inflation is relatively uncommon for dairy products, leaving little historical data on which to base reliable predictions, Vitaliano said.
U.S. dairy exports, meanwhile, are now on track to potentially reach record volume this year after a slow start during January and February. Monthly U.S. dairy exports as a percent of U.S. milk solids production established a new record of 19.4% in May.
For more information on commercial use, dairy trade, milk production, product inventories, prices and margins, click here.
Dairy cull cow marketing steady in June
Following seasonal patterns and higher milk prices, marketing of U.S. dairy cull cows through U.S. slaughter plants was steady in June at 233,000 head, the second-lowest monthly total in the past year.
The June 2022 total was up 7,800 head from May but 4,500 head less than June 2021. Both June 2022 and 2021 had 26 non-holiday weekdays and Saturdays.
At 1.521 million head, year-to-date (January-June 2022) cull dairy cow slaughter was about 42,500 less than the same period a year earlier. Factoring in the slowdown, the USDA’s Milk Production report estimated there were 9.423 million cows in U.S. herds in June 2022, down about 78,000 head from the same month a year earlier.
Heaviest dairy culling during June 2022 occurred in the Upper Midwest (Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin) at 58,500 head. That was followed in the Southwest (Arizona, California, Hawaii and Nevada), where 52,900 dairy cows were marketed for beef.
Other regional totals were estimated at 37,100 head in Delaware, Maryland, Pennsylvania, West Virginia and Virginia; 30,000 head in Alaska, Idaho, Oregon and Washington; and 26,000 head in Arkansas, Louisiana, New Mexico, Oklahoma and Texas.
Primary data for the USDA’s Livestock Slaughter report are obtained from reports completed by inspectors from the USDA Food Safety and Inspection Service (FSIS). These counts are combined with data from state-administered non-federally inspected (NFI) slaughter plants to derive total commercial slaughter estimates. The USDA estimates there are approximately 900 livestock slaughter plants in the U.S. operating under federal inspection and nearly 1,900 state-inspected or custom-exempt slaughter plants.
World Dairy Expo to feature dairy policy seminar
A seminar on potential dairy policy reforms will be held in conjunction with World Dairy Expo, Oct. 7, beginning at noon (Central time).
Sponsored by the NMPF, the discussion will be moderated by Mark Stephenson, recently retired director of dairy policy analysis at the University of Wisconsin – Madison. Panelists will include Dana Coale, deputy administrator of USDA Ag Marketing Sevice Dairy Program; Roger Cryan, chief economist with the American Farm Bureau Federation; Andrew Novakovic, professor emeritus, Cornell University; and Jim Sleper, managing partner, Sleper Consulting LLC, who is currently overseeing NMPF’s Federal Milk Marketing Order modernization process.
All World Dairy Expo seminars are free and presented in Mendota Room 1 of the Exhibition Hall. Seminars are also presented online through ExpoTV.
For a complete list of World Dairy Expo seminars, click here.
Seven named to fluid milk promotion board
The USDA announced the reappointment of two members and new appointment of five others to serve on the National Fluid Milk Processor Promotion Board.
Six of the seven appointees will serve three-year terms, effective immediately through June 30, 2025. The other appointee will serve the remaining year of a vacant position, effective immediately and expiring June 30, 2023.
The reappointed members are:
- Hugo Lizarraga, San Antonio, Texas
- Rachel Kyllo, St. Paul, Minnesota (at-large, processor)
The newly appointed members are:
- Lynne Bohan, Lynnfield, Massachusetts
- Pat Boyle, Dallas, Texas
- Brad Gruen, Chicago, Illinois
- Robin Dubuc, Cincinnati, Ohio (at-large, processor)
- Robert Baker, Atlanta, Georgia (at-large, public member)
All appointees will serve three-year terms beginning immediately and ending June 30, 2025, except Dubuc, who is filling a vacant position for a one-year term ending June 30, 2023.
The National Fluid Milk Processor Promotion Board is composed of 15 fluid milk processors from 15 geographic regions and five at-large members. At least three at-large members must be fluid milk processors, and at least one at-large member must be from the general public.
The National Fluid Milk Program is financed by a mandatory 20-cent per hundredweight assessment on all fluid milk processed and marketed commercially in consumer-type packages in the contiguous 48 states and the District of Columbia. Processors who commercially process and market three million pounds or less per month, excluding those fluid milk products delivered to the residence of a consumer, are exempt from assessments.
Dairy product inventories larger than last year
With milk production up slightly, volumes of cheese in cold storage were little changed in June, based on latest USDA estimates.
According to the USDA’s monthly Cold Storage report, released July 23:
Total natural cheese stocks were estimated at about 1.51 billion pounds, down just 7 million pounds from May 2022 but up 5% from June 2021. Stocks of American cheese were estimated at about 847.7 million pounds, down 1% from May but 5% more than June a year ago.
Butter stocks were estimated at 331.8 million pounds, up 3% from May but down 20% compared with June 2021.
The USDA’s preliminary Milk Production report indicated June 2022 U.S. milk output was up 0.2% compared to June 2021 at 18.98 billion pounds.
