Federal Milk Marketing Order (FMMO) Class III and IV milk prices declined in December, and the spread between the two class prices narrowed. What impact that has on prices and marketing will be revealed later this week when FMMO pooling estimates, uniform prices and producer price differentials are scheduled to be released. Check back with Progressive Dairy for an update on Jan. 16.
December class prices lower
Milk class prices announced on Jan. 5 are:
- At $23.11 per hundredweight (cwt), the December Class II milk price was down $1.56 from November but $3.27 more than December 2021. It averaged $25.27 per cwt for the year, $8.83 more than the average in 2021.
- At $20.50 per cwt, the December 2022 Class III milk price fell 51 cents from November but is $2.14 more than December 2021. The 2022 Class III milk price averaged $21.96 per cwt, $4.88 more than the 2021 average of $17.08 per cwt but below the record-high average of $22.34 per cwt in 2014.
- At $22.12 per cwt, the December 2022 Class IV milk price declined $1.18 from November but was $2.24 more than December 2021. The 2022 Class IV price average $24.47 per cwt, $8.38 more than a year earlier and $2.38 more than average in 2014.
Potentially affecting FMMO pooling, the December 2022 Class IV milk price is $1.62 more than the month’s Class III milk price, the narrowest spread since June. For the year, the Class IV-III spread averaged $2.52 per cwt.
In addition to Class II-III-IV prices announced above, the December 2022 Class I base price was previously announced at $22.58 per cwt, down $1.51 from November. With zone differentials, December 2022 Class I prices averaged approximately $25.40 per cwt across all FMMOs, ranging from a high of $27.98 per cwt in the Florida FMMO 6 to a low of $24.38 per cwt in the Upper Midwest FMMO 30.
Butterfat value lower, protein value up
Leading to the decline in December Class III and IV milk prices, a drop in the value of butterfat again offset a gain in the value of protein.
The value of butterfat fell more than 22 cents from November to about $3.15 per pound, the lowest since May. It’s still the 11th straight month the butterfat value topped $3 per pound. It averaged about $3.26 per pound for the year, $1.37 more than a year earlier.
The value of milk protein rose almost 12 cents from November to just under $2.66 per pound, the highest since July. It averaged about $2.72 per pound for the year, 4 cents less than in 2021.
The December value of nonfat solids fell about a nickel to about $1.27 per pound, while the value of other solids dipped slightly to 26.5 cents per pound.
Prices headed lower; spread continues to narrow
Based on current milk futures prices, Class III-IV milk prices will decline in 2023, while the average Class IV milk price maintains a small premium over the Class III milk price.
As of the close of trading on Jan. 5, the Chicago Mercantile Exchange (CME) Class III milk futures price closed at $19.11 per cwt for January; the Class IV milk futures price closed at $19.41 per cwt. If those prices hold, the January Class III-IV milk price gap will shrink to about 30 cents, the smallest difference since September 2021.
The January 2023 advanced Class I base price was announced at $22.41 per cwt, down 17 cents from December 2022. With zone differentials, January Class I prices averaged approximately $25.23 per cwt across all FMMOs, ranging from a high of $27.81 per cwt in the Florida FMMO 6 to a low of $24.21 per cwt in the Upper Midwest FMMO 30.
