Economic Update highlights:

Natzke dave
Dave Natzke
Editor / Progressive Dairy

June milk prices will reflect weak protein and Class III prices

The value of butterfat held in June, but Federal Milk Marketing Order (FMMO) uniform prices are headed lower, and the wide price spread between Class III-IV milk prices suggests Class IV depooling will be heavy.

  • June class prices: June 2023 FMMO pooling estimates, uniform prices and producer price differentials are scheduled to be released the week of July 10. Three of four milk class prices declined from May, with another significant drop in the Class III price. Class prices announced on June 28 were:
    • At $18.83 per hundredweight (cwt), the June Class II milk price is down 28 cents from May and $7.82 less than June 2022. It’s the lowest since November 2021.
    • At $14.91 per cwt, the Class III milk price fell $1.20 from May and is $9.42 less than June 2022 and the lowest since May 2020.
    • At $18.26 per cwt, the June 2023 Class IV milk price rose 16 cents from May but is $7.57 less than June 2022.
    • In addition to Class II-III-IV prices announced above, the June 2023 advanced Class I base price was previously announced at $18.01 per cwt, down $1.56 from May and $7.86 less than June 2022. It’s the lowest since November 2021.

Potentially affecting FMMO pooling, the June 2023 Class IV milk price is $3.35 more than the month’s Class III milk price, the widest spread since last September and providing significant incentive for Class IV depooling.

  • Protein value falls further: Contributing to the June milk class price calculations, the butterfat value held while the value of protein fell to the lowest level since February 2019.

At about $2.76 per pound, the value of butterfat was the highest since January but it’s the sixth consecutive month below $3 per pound.

The value of milk protein fell 28.5 cents from May to about $1.51 per pound, a 52-month low.

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The value of nonfat solids rose about 1.5 cents to about 99 cents per pound, while the value of other solids dropped 6 cents to just under 13 cents per pound, the lowest since September 2020.

  • Looking ahead: Based on current futures prices, milk prices will continue lower next month. As of the close of trading on June 28, the Chicago Mercantile Exchange (CME) Class III milk futures price closed at $14.35 per cwt for July, down another 56 cents from June. The Class IV milk futures price closed at $17.95 per cwt for July, down 31 cents from June.

If those prices hold, the July Class III-IV milk price gap will hit $3.60 per cwt, maintaining incentives to depool Class IV milk.

Already announced, July 2023’s advanced Class I base price is $17.32 per cwt, down 69 cents from June, $8.55 less than July 2022 and the lowest since October 2021.

Vitaliano: June dairy outlook

Bright spots in the dairy outlook are harder to find than usual at the moment, according to National Milk Producers Federation’s Peter Vitaliano. Summarizing dairy markets in the June 2023 Dairy Management Inc./National Milk Producers Federation Dairy Market Report, he said butter is acting as the pole holding up the dairy price tent, having found a firm floor at around $2.40 per pound. Most dairy products are unwinding from their peak inflation rates of 2022, although that trend is not yet translating into correspondingly strong wholesale prices. Even so, domestic commercial use of milk in all dairy products is recovering from last year’s inflation and growing by more than 2% by all milk-equivalent measures.

For more information on commercial use, dairy trade, milk production, product inventories, prices and margins, view the June Dairy Market Report.

USDA reports update acreage, stocks

Two USDA reports released on June 30 provide an early outlook for major dairy feedstuffs.

  • The Acreage report estimates planting data from a USDA National Ag Statistics Service (NASS) survey during the first two weeks of June.
  • The Grain Stocks report estimates on-farm and off-farm stocks of major feedstuffs as of June 1.

Depending on the growing season, there will be more corn and hay but less soybeans and cottonseed. Here’s a summary of those two reports:

  • Corn-planted area for all purposes in 2023 is estimated at 94.1 million acres, up 6% (5.52 million acres) from last year. This represents the third-highest planted acreage in the U.S. since 1944. Farmers responding to the survey indicated that 2.49 million acres of the estimated corn acreage remain to be planted at the time of the interview. Area expected to be harvested for grain at 86.3 million acres is up 9% from last year. 

As of June 1, corn stocks in all positions totaled 4.11 billion bushels, down 6% a year earlier. Of the total stocks, 2.22 billion bushels are stored on farms.

  • Soybean-planted area for 2023 is estimated at 83.5 million acres, down 5% from last year. Farmers responding to the survey indicated that 8.22 million acres of the estimated soybean acreage remained to be planted at the time of the interview. Area for harvest forecast at 82.7 million acres is down 4% from 2022. If realized, this will be the fifth-highest planted and sixth-highest harvested soybean acreage on record. 

Soybeans stored in all positions on June 1 totaled 796 million bushels, down 18% a year earlier. On-farm stocks totaled 323 million bushels, down 3% from a year ago. 

  • Cotton: An early indicator of potential cottonseed availability, cotton growers planted 11.1 million acres in 2023, down 19% from last year. The largest decrease is in Texas, where upland cotton-planted acreage decreased by 1.75 million acres from last year. In addition to Texas, Arkansas, Mississippi and Oklahoma are also showing a decrease of 100,000 acres or more compared with last year.
  • Hay: Producers intend to harvest 52 million acres of all hay in 2023, up 5% from 2022. Alfalfa-harvested acreage is expected to be 15.7 million acres, up 5% from 2022. All other hay (excluding alfalfa) is expected to be up 5% from last year at 36.3 million acres.

I-29 Moo University to present ‘milk margins’ webinar, July 20

The I-29 Moo University 2023 Dairy Webinar Series continues on July 20, noon-1 p.m. (Central time), with a focus on milk margins.

The webinar will feature Gonzalo Ferreira, associate professor in the school of animal sciences at Virginia Tech. He’ll discuss the cloudy outlook for milk income margins and the critical need for financial management.

There is no fee to participate in the webinar, but registration is required at least one hour before the webinar.

I-29 Moo University is a consortium of extension dairy specialists from the land-grant universities in Iowa, Minnesota, Nebraska, North Dakota and South Dakota.

ICYMI (In case you missed it)

  • Bongards expanding: Midwest cheese and whey manufacturer Bongards Creameries announced a $125 million investment in its Perham, Minnesota, plant. The expansion will increase overall plant capacity by 30% to 5.5 million pounds of milk per day. The farmer-owned co-op, with producers in Minnesota and North Dakota, will expand milk intake bays, cheese packaging equipment, whey drying and packaging equipment, whey warehousing and wastewater treatment. Major work on the project is expected to commence in July 2023 and be completed in June 2025.