Digest highlights

Natzke dave
Dave Natzke
Editor / Progressive Dairy

NMPF endorses FMMO modernization provisions

National Milk Producers Federation (NMPF) leadership unanimously endorsed a proposal to modernize the Federal Milk Marketing Order (FMMO) milk-pricing system at its annual meeting, Oct. 25.

Central to discussions was recommendations developed on federal milk pricing after more than 100 meetings held over the past year. NMPF’s board endorsed a proposal that:

  • Returns to the “higher-of” Class I mover
  • Discontinues including barrel cheese in the protein component price formula
  • Extends the current 30-day reporting limit to 45 days on forward-priced sales on nonfat dry milk and dry whey to capture more exports sales in the USDA product price reporting
  • Updates milk component factors for protein, other solids and nonfat solids in the Class III and Class IV skim milk price formulas
  • Develops a process to ensure make allowances are reviewed more frequently through legislation directing the USDA to conduct mandatory plant-cost studies every two years
  • Updates dairy product manufacturing allowances contained in the USDA milk price formulas

NMPF continues work on the Class I milk price surface as it examines information on county-level Class I price differentials. That work is expected to be completed later this year. Any final proposal will be reviewed by the organization before it’s submitted to the USDA to be considered for a federal order hearing. 

November 2022 Class I base price rebounds

November’s FMMO advanced Class I base price moved back above $24 per hundredweight (cwt), hitting a three-month high. The “average-of” Class I mover formula also had the smallest negative impact since July.

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At $24.09 per cwt, the November 2022 Class I base is up $1.38 from October and still $6.11 above November 2021. The 2022 11-month average is $23.76 per cwt, up $7.15 from the January-November 2021 average of $16.61 cwt and continues to be the highest average for that period on record.

Class I zone differentials are added to the base price at principal pricing points to determine the actual Class I price in each FMMO. With those additions, November 2022 Class I prices will average approximately $26.91 per cwt across all FMMOs, ranging from a high of $29.49 per cwt in the Florida FMMO 6 to a low of $25.889 per cwt in the Upper Midwest FMMO 30.

Analyzing the Class I mover, the spread in the monthly advanced Class III skim milk pricing factor ($9.17 per cwt) and advanced Class IV skim milk pricing factor ($12.61 per cwt) is $3.44 per cwt, the narrowest since July 2022.

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 $25.04 per cwt, 95 cents more than the actual price determined using the average-of plus 74 cents formula.

The economic impact on uniform milk prices within individual FMMOs depends on Class I milk utilization in each FMMO.

USDA expands SNAP Dairy Incentive Program

The USDA announced a significant expansion of the Healthy Fluid Milk Incentives Projects (HFMIP), a pilot program that helps participants in the Supplemental Nutrition Assistance Program (SNAP) purchase healthy fluid milk options at qualifying food retail outlets.

The USDA awarded $3 million in new funding to Auburn University’s Hunger Solutions Institute (HSI) to bring the program to SNAP beneficiaries through six retailers and 116 retail outlets in Alabama, California, Georgia and South Dakota. All participating retailers – supermarkets, independent grocery stores, convenience stores and innovative food store models – currently serve SNAP households, some with more than 80% of their customers representing SNAP households.

Incentives range from an immediate percentage-off discount to a dollar-for-dollar match for a future milk purchase. 

The HFMI program, created in the 2018 Farm Bill, uses incentives to encourage SNAP participants to buy and consume milk. According to the USDA’s Food and Nutrition Service (FNS), fluid milk qualifying for the incentive program includes all varieties of pasteurized cow’s milk that (1) is without flavoring or sweeteners, (2) is consistent with the most recent dietary recommendations, (3) is packaged in liquid form and (4) contains vitamins A and D at levels consistent with the FDA, state and local standards for fluid milk.

After a pilot run in Texas in 2020, the FNS expanded the HFMI program in 2021 to additional retailers in Texas and New Jersey. The Baylor Collaborative on Hunger and Poverty will continue to administer HFMIP pilot programs in 42 stores in those two states.

Vitaliano: Production growth evident

What rising milk production means for milk prices is somewhat unclear, according to National Milk Producers Federation’s Peter Vitaliano. Summarizing dairy markets in the October 2022 Dairy Management Inc./National Milk Producers Federation Dairy Market Report, he noted that while margins under the Dairy Margin Coverage (DMC) program have returned to payment-triggering levels, robust demand and market signals imply a floor to price declines.

While this year’s retail price inflation for dairy products is affecting domestic consumption, the relative inelasticity of dairy demand seems to be making that effect modest, and in some cases, any drop in domestic demand has been partially offset by strong export sales.

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

Read also: September milk production up 1.5%

Dairy cull cow marketing down in September

Marketing of U.S. dairy cull cows through U.S. slaughter plants declined slightly in September and remained behind last year’s pace.

At 260,500 head, the September total was down 5,600 from August and about 4,100 less than September 2021. Both September 2021 and 2022 had 26 weekdays/Saturdays. The USDA’s Milk Production report estimated there were 9.41 million cows in U.S. herds in September, up about 6,000 head from the same month a year earlier.

At 2.28 million head, year-to-date (January-September 2022) cull dairy cow slaughter was about 59,900 less than the same period a year earlier. It’s the lowest nine-month total to start the year since 2016.

In summer and fall of 2021, U.S. cow numbers were on a path of sharp decline, dropping by about 102,000 head between May and September, culminating in a 140,000-head decline between May 2021 and January 2022. 

Heaviest dairy culling during September 2022 occurred in the the Southwest (Arizona, California, Hawaii and Nevada), where 62,300 dairy cows were marketed for beef. That was followed closely by the Upper Midwest (Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin) at 62,100 head. 

Other regional totals were estimated at 40,500 head in Delaware, Maryland, Pennsylvania, West Virginia and Virginia; 35,400 head in Alaska, Idaho, Oregon and Washington; and 30,600 head in Arkansas, Louisiana, New Mexico, Oklahoma and Texas.

Beef cow marketing also slowed somewhat in September. However, year-to-date beef cow slaughter is up more than 341,000 compared to the same period in 2021, topping 2.9 million head.

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.

USDA establishing regional networks for organic transition

The USDA is establishing cooperative agreements in six regions for the Organic Transition Initiative (OTI) Transition to Organic Partnership Program (TOPP). Organizations participating in the partnership network will work together to establish and administer a farmer-to-farmer mentorship program providing training, education and outreach activities for producers transitioning toward organic certification.

The TOPP partnership network covers six regions: the Mid-Atlantic/Northeast, Southeast, Midwest, Plains, Northwest and West/Southwest. Partnerships will provide mentoring services, technical assistance, community building and organic workforce development.

For a map with the organizations establishing the partnership network and a form that interested farmer mentors, mentees and other farm service organizations can use to express their interest in this initiative, click here.

A listening session will be held on Nov. 15 to gather stakeholder input about another OTI program: the Organic Pinpointed Market Development Program. This initiative is designed to develop new and expanded organic markets.

September DMC numbers coming next Monday

The USDA releases September Dairy Margin Coverage (DMC) margin and indemnity payments on Oct. 31. Check the Progressive Dairy website for analysis.