Administrators of the 11 Federal Milk Marketing Orders (FMMOs) reported May 2023 prices and pooling data. Uniform or blend prices were up in high Class utilization FMMOs but down elsewhere. With a wide Class III-IV price spread, Class IV milk pooling moved to a five-month low.
Here’s Progressive Dairy’s monthly review of the numbers to provide some additional transparency on your milk check.
Uniform prices, PPDs
Compared with April, May 2023 statistically uniform milk prices were mixed in the 11 FMMOs, increasing in Appalachian 5, Florida 6 and Southeast 7 (Table 1), where Class I utilization was high. Despite those small increases, overall May uniform prices were the lowest since September-October of 2021.
The highest uniform price for the month was in Florida 6 at $23.95 per hundredweight (cwt), with the low in the Upper Midwest 30 at $16.49 per cwt.
May baseline producer price differentials (PPDs) were up across all applicable FMMOs (Table 1), ranging from a high of $3.35 per cwt in the Northeast 1 to a low of 38 cents in the Upper Midwest 30. PPDs have zone differentials, so actual amounts will vary within each FMMO. Also, individual milk handlers apply premiums and deductions to milk checks differently.
Class prices for May
Compared to a month earlier, two of four FMMO milk class prices were down:
- Class I base price: $19.57 per cwt, up 72 cents from April 2023 but $5.88 less than May 2022
- Class I base with zone differentials: $22.39 per cwt across all FMMOs, ranging from a high of $24.97 per cwt in the Florida FMMO 6 to a low of $21.37 per cwt in the Upper Midwest FMMO 30
- Class I mover formula: The spread in the monthly advanced Class III skim milk pricing factor ($10.37 per cwt) and advanced Class IV skim milk pricing factor ($9.08 per cwt) was $1.29 per cwt, up slightly from April. 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 $19.48 per cwt, 9 cents less than the actual price determined using the “average-of plus 74 cents” formula.
- Class II milk price: $19.11 per cwt, down 9 cents from April and $6.76 less than May 2022
- Class III milk price: 16.11 per cwt, down $2.41 from April and $9.10 less than May 2022; the lowest since August 2021
- Class IV milk price: $18.10 per cwt, up 15 cents from April but $6.89 less than May 2022
- Class III-IV milk price spread: The May 2023 Class IV milk price is $1.99 more than the month’s Class III milk price, providing substantial incentive for Class IV depooling.
Component values, tests
Contributing to the May milk class price calculations, the butterfat value improved slightly, while the value of protein fell to a four-year low.
The value of butterfat rose to about $2.76 per pound, up almost 6 cents from April and the highest since January. It’s still the fifth consecutive month the value of butterfat dropped below $3 per pound.
The value of milk protein fell 76 cents from April to about $1.80 per pound, the lowest since pre-pandemic March 2019.
The value of nonfat solids fell about one-half cent, to about 97 cents per pound, while the value of other solids dropped 6 cents, to just under 19 cents per pound.
Affecting statistical uniform prices “at test,” the onset of the spring flush meant May average butterfat and protein tests in pooled milk were almost all lower from April in FMMOs providing preliminary data.
With its high average butterfat (4.2%) and protein (3.36%) tests, producers in the Pacific Northwest 124 had the potential to see the at-test price at $20.28 per cwt, about $2.47 above the statistically uniform price. In California 51, the at-test average was $19.71 per cwt, $2.05 above the statistically uniform price. In Central 32, the at-test average was $19.85 per cwt, $1.81 above the statistically uniform price.
Impact on pooling
Even with one more day of production compared with April, the overall FMMO pool was offset by a heavier volume of Class IV milk depooling in May. Pooling on all FMMOs was down about 122 pounds from April at 13.47 billion pounds. The USDA releases May milk production estimates on June 21, determining the percent of U.S. milk production pooled through FMMOs.
May Class I pooling was up nearly 155 million pounds from April at 3.35 billion pounds, which represented about 25% of total milk pooled. Class II pooling was down 103 million pounds to 1.22 billion pounds, representing about 9% of the total pooled.
With the Class III-Class IV spread, May returned more Class III milk to the pool, while higher-value Class IV milk stayed away.
Class III pooling was up nearly 2.2 billion pounds from April at 7.54 billion pounds, representing about 56% of the total pool (Table 2).
At about 1.36 billion pounds in May, Class IV pooling across all FMMOs decreased 2.35 billion million pounds from April and represented about 10% of the total milk pooled (Table 2). It was the lowest Class IV volume and percentage pooled since December 2022.
Looking ahead
June 2023 uniform prices and pooling totals will be announced around July 11-14. The outlook for June prices is lower:
- Class I base price: Already announced, it’s $18.01 per cwt, down $1.56 from May and $7.86 less than June 2022. It’s the lowest Class I base price since November 2021.
- Class I base with zone differentials: $21.81 per cwt in the Florida FMMO 6 to a low of $19.81 per cwt in the Upper Midwest FMMO 30
- Class I mover formula: The spread in the monthly advanced Class III skim milk pricing factor ($7.17 per cwt) and advanced Class IV skim milk pricing factor ($8.78 per cwt) is $1.61 per cwt, the widest spread since January 2023. 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 $18.07 per cwt, 6 cents more than the actual price determined using the average-of plus 74 cents formula.
- Other class prices: April Class II, III and IV milk prices will be announced on June 28. As of the close of trading on June 14, the June Chicago Mercantile Exchange (CME) Class III milk futures price closed at $15.05 per cwt, down more than $1 from May; the June Class IV milk futures price closed at $18.11 per cwt, up a penny from May.
- Class III-IV milk price spread: Based on those futures prices, Class IV milk handler depooling incentives jump some more in June, with the Class IV-III price spread reaching $3 per cwt, the widest since July-October 2022.
As always, markets change.
WASDE outlook
In a repeat of the previous month, the USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report, released June 9, reduced the milk production estimate for 2023 but also lowered Class III and all-milk price forecasts for the year.
Read: USDA cuts 2023 milk production forecast, Class III and all-milk price projections lowered
