May 2022 “mailbox” prices averaged about 98 cents per hundredweight (cwt) less than announced average “all-milk” prices for the same month, based on a preliminary look at two USDA milk price announcements.
- During May, U.S. all-milk prices averaged $27.30 per cwt, up 20 cents from April 2022 and $8.20 more than May 2021.
- The May 2022 mailbox prices for selected Federal Milk Marketing Orders (FMMOs) averaged $26.32 per cwt, up 10 cents per cwt from April 2022 and $8.30 more than May 2021, but 98 cents less than the announced all-milk price.
In Table 1, Progressive Dairy attempts to align the state-level all-milk prices and the FMMO marketing area prices as closely as possible. The May spread between individual states or regions varied widely, with a difference of -$3.37 per cwt in Florida to a +16 cents per cwt in Illinois.
The difference in the two announced prices can affect dairy risk management, since indemnity payments under the Dairy Margin Coverage (DMC), Dairy Revenue Protection (Dairy-RP) and Livestock Gross Margin for Dairy (LGM-Dairy) programs are all based on the all-milk price.
As Progressive Dairy notes each month, there are disclaimers. Comparing the all-milk price and mailbox price isn’t exactly apples to apples.
All-milk prices
The all-milk price is the estimated gross milk price received by dairy producers for all grades and qualities of milk sold to first buyers, before marketing costs and other deductions. The price includes quality, quantity and other premiums, but hauling subsidies are excluded.
Prices are reported monthly by the USDA National Ag Statistics Service (NASS).
Mailbox prices
The mailbox price is the estimated net price received by producers for milk, including all payments received for milk sold and deducting costs associated with marketing. Based on latest annual data, about 61% of U.S. milk production was marketed through FMMOs in 2021.
Data included in all payments for milk sold are over-order premiums; quality, component, breed and volume premiums; payouts from state-run over-order pricing pools; payments from superpool organizations or marketing agencies in common; payouts from programs offering seasonal production bonuses; and monthly distributions of cooperative earnings. Annual distributions of cooperative profits/earnings or equity repayments are not included.
Included in mailbox price costs associated with marketing milk are hauling charges; cooperative dues, assessments, equity deductions/capital retains and reblends; the FMMO deduction for marketing services; and federally mandated assessments such as the dairy checkoff and budget sequestration deductions.
Mailbox prices are reported monthly by the USDA’s Agricultural Marketing Service (AMS) but generally lag all-milk price announcements by a month or more.
Geographies may differ
The price announcements also reflect similar – but not exactly the same – geographic areas. The NASS reports monthly average all-milk prices for the 24 major dairy states. The mailbox prices reported by the USDA’s AMS cover selected FMMO marketing areas.
For example, while NASS reports an all-milk price for Georgia, the mailbox price lumps Georgia with other Southeast states: Alabama, Arkansas, Louisiana and Mississippi. Similarly, Kansas is part of the Corn Belt states; Oregon and Washington are combined in the Northwest states; Vermont is among six New England states; and Virginia is clustered with Kentucky, North Carolina, South Carolina and Tennessee among Appalachian states.
