A widening gap in August Federal Milk Marketing Order (FMMO) Class IV and Class III milk prices ensures there’s even more incentive to depool Class IV milk. Based on FMMO milk class prices announced on Aug. 31, the August 2022 Class IV milk price is $4.71 more than the month’s Class III milk price, the widest since November 2020, when the Class III milk price was supported by pandemic food box cheese purchases.
August 2022 FMMO pooling estimates, uniform prices and producer price differentials are scheduled to be released on Sept. 11-14. Check back with Progressive Dairy for an update.
August class prices
- At $20.10 per hundredweight (cwt), the August 2022 Class III milk price dropped $2.42 from July but was $4.15 more than August 2021. Through the first eight months of 2022, the Class III milk price averaged $22.54 per cwt, $5.76 more than the same period a year earlier but just 5 cents more than the January-August average in 2014.
- At $24.81 per cwt, the August 2022 Class IV milk price declined 98 cents from July but was $8.89 more than August 2021. The January-August 2022 average stands at $24.83 per cwt, $9.71 more than a year ago and $1.55 more than eight-month average in 2014.
- At $26.91 per cwt, the August Class II milk price was up 25 cents from July and $10.40 more than August 2021.
Butterfat value up; protein drops
Maintaining the stronger August Class IV milk price, the value of butterfat rose 4 cents from July to about $3.40 per pound, likely the highest on record. It’s the seventh straight month the butterfat value topped $3 per pound. Prior to 2022, the value of butterfat surpassed $3 per pound only three times in the past nine years, reaching $3.25 per pound in September 2014, $3.18 per pound in November 2015 and $3.01 per pound in August 2017.
In contrast, the value of milk protein dipped about 77 cents from July to about $2.14 per pound. The value of protein is now down nearly $1.73 per pound since May and the lowest since May 2020, when the COVID-19 pandemic provided an initial shock to dairy markets and before the USDA food box purchases boosted cheese prices.
The value of nonfat solids fell about 13 cents, to $1.49 per pound. The value of other solids decreased about 4.5 cents, to 31.5 cents per pound.
Wide spread to remain
Based on current milk futures prices, the Class III-IV milk price spread will remain large heading into the final quarter of 2022.
As of the close of trading on Aug. 31, the Chicago Mercantile Exchange (CME) Class III milk futures price closed at $19.63 per cwt for September; the Class IV milk futures price closed at $24.02 per cwt. If those prices hold, the September Class III-IV milk price gap will remain at about $4.39 per cwt. At $3.36 and $2.07, the gap remains wide in October and November, respectively, extending the Class IV depooling incentives.
