Update Highlights

February 2022 Class I base price jumps; ‘higher-of’ formula back in play

The Federal Milk Marketing Order (FMMO) advanced Class I base price moves to an 86-month high for February. At $21.64 per hundredweight (cwt), it’s up $1.93 from January 2022 and $6.10 more than February 2021.

Natzke dave
Dave Natzke
Editor / Progressive Dairy

A Class I differential for each order's principle pricing point is added to the base price to determine the Class I price in each FMMO. With differentials added, the Class I base price ranges from $27.04 per cwt in the Florida FMMO to $23.44 per cwt in the Upper Midwest FMMO, with an all-market average of $24.46 per cwt.

The 2021 Class I base price averaged $16.83 per cwt, down 8 cents from 2020 ($16.91 per cwt) and 16 cents less than 2019 ($16.99 per cwt).

After a seven-month reprieve, the debate over the “higher-of” versus “average-of plus 74 cents” formula resurfaces in February.

The difference between the advanced Class III skim milk pricing factor ($10.43 per cwt) and the advanced Class IV skim milk pricing factor ($12.97 per cwt) is $2.54 per cwt, plus the advanced butterfat pricing factor, means producers will see a negative impact using the average-of plus 74 cents Class I mover compared to the old higher-of formula.

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Based on Progressive Dairy calculations, the Class I mover calculated under the average-of plus 74 cents formula is $21.64 per cwt, 51 cents less than the $22.15 per cwt calculated using the higher-of formula.

That difference will be diminished in producer milk checks, however, depending on Class I utilization in each FMMO and its impact on “blend” or uniform milk prices.

Vitaliano: Big changes from 2014

Recent USDA data shows dairy markets are in a very different situation than almost any experienced since 2014, according to the National Milk Producers Federation’s Peter Vitaliano, summarizing markets in the January 2022 Dairy Management Inc./National Milk Producers Federation Dairy Market Report.

The dominant features of the basic U.S. dairy situation continue to be tighter milk production, record export volumes, higher prices, sluggish domestic consumption and dropping inventories. The long period of tough market conditions from 2014 until recently constitutes a major reason for the production contraction that’s driving the current situation. To no surprise, it’s causing much speculation about how long it will last.

For more information on commercial use, dairy trade, milk production, product inventories, prices and margins, click here.

Future of Federal Dairy Milk Pricing Forum scheduled

In an effort to find dairy producer consensus on FMMO issues, the American Dairy Coalition (ADC) is hosting a virtual “Future of Federal Dairy Milk Pricing Forum,” Feb. 15, 11 a.m.-12:30 p.m. (Central time).

The forum is designed to take input from individual producers and heads of state and national producer associations. Presenters will include:

  • Calvin Covington, retired co-op CEO with FMMO hearing experience, who will discuss what FMMOs do, don’t do, can and can’t do, and how the hearing process works

  • Frank Doll, a dairy producer serving on the American Farm Bureau Federation’s dairy policy committee

  • Mike McCully, a dairy industry consultant who will give a perspective on how changes to the Class I fluid milk pricing impacts farm mailbox milk prices

The panel will be moderated by Progressive Dairy Editor Dave Natzke.

For more information and to register for the free forum, click here.

2021 dairy cull cow slaughter tops 3 million

U.S. annual dairy cull cow slaughter topped 3 million head for a fourth consecutive year in 2021, based on the USDA’s monthly Livestock Slaughter report.

At 267,800 head, December 2021 dairy cow slaughter in federally inspected plants was up more than 22,000 from November 2021 but down 5,700 from December 2020. Both December 2020 and December 2021 had 22 non-holiday weekdays and four Saturdays.

Through 2021, dairy cull cow slaughter was estimated at 3.1 million, about 42,700 head more than 2020.

Heaviest dairy culling during December 2021 occurred in the Southwest (Arizona, California, Hawaii and Nevada), where 66,700 dairy cows were marketed for beef. That was followed by the Upper Midwest (Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin) at 64,400 head.

Other regional totals were estimated at 46,500 head in Delaware, Maryland, Pennsylvania, West Virginia and Virginia; 29,900 head in Arkansas, Louisiana, New Mexico, Oklahoma and Texas; and about 28,700 head in Alaska, Idaho, Oregon and Washington.  end mark