Update highlights

Natzke dave
Dave Natzke
Editor / Progressive Dairy

Class I base price nears two-year low in August

The Federal Milk Marketing Order (FMMO) advanced Class I base price continues its decline in August, falling to the lowest level since September 2021. At $16.62 per hundredweight (cwt), the August 2023 Class I base is down 70 cents from July and $8.51 less than August 2022.

Class I zone differentials are added to the base price at principle pricing points to determine the actual Class I price in each FMMO. With those additions, August Class I prices will average approximately $19.44 per cwt across all FMMOs, ranging from a high of $22.02 per cwt in the Florida FMMO 6 to a low of $18.42 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 ($4 per cwt) and advanced Class IV skim milk pricing factor ($8.95 per cwt) is $4.95 per cwt, the widest spread since October 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 $18.28 per cwt, about $1.66 more than the actual price determined using the “average-of plus 74 cents” formula.

Advertisement

June dairy cull cow marketing up

June U.S. dairy cull cow marketing picked up slightly as milk income fell and margins tightened, but the rate of slaughter remained on a fairly seasonal pace.

The number of dairy cull cows marketed through U.S. slaughter plants was estimated at 255,700 in June 2023, up 6,600 from May 2023 and 22,700 more than June 2022.

June 2022 and 2023 each had 26 non-holiday weekdays and Saturdays. Slaughter averaged 9,800 head per business day, up slightly from May.

The USDA estimated there were 9.41 million dairy cows in U.S. herds in June 2023, down 16,000 from May and putting the June culling rate at about 2.7% of the herd. Based on the monthly data, year-to-date January-June dairy cull cow slaughter now stands at 1.619 million head, up 98,400 from the same period a year earlier.

Heaviest dairy cow culling during June occurred in the Upper Midwest (Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin) at 66,200 head. That was followed in the Southwest (Arizona, California, Hawaii and Nevada) at 56,700 head.

Other monthly regional totals were estimated at 36,800 head in Delaware, Maryland, Pennsylvania, West Virginia and Virginia; 35,200 head in Arkansas, Louisiana, New Mexico, Oklahoma and Texas; and 31,500 head in Alaska, Idaho, Oregon and Washington.

Primary data for the USDA’s Livestock Slaughter report is obtained from reports from about 900 federally inspected plants and nearly 1,900 state-inspected or custom-exempt slaughter plants.

Vitaliano: Butter supported July dairy outlook

Those looking for bright spots in this year’s dairy outlook have found their search increasingly challenging, according to National Milk Producers Federation’s Peter Vitaliano. Summarizing dairy markets in the July 2023 Dairy Management Inc./National Milk Producers Federation Dairy Market Report, he said butter continues to do outsized work in supporting milk prices, holding firm while other key product prices sag. The butterfat value of producer milk checks has averaged an estimated 58% of total milk checks since last August, compared to a more normal 40% during 2020-21.

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

May 2023 fluid milk sales steady

Fluid milk sales were steady in May 2023, with whole milk providing some consumption support, according to monthly data from the USDA Agricultural Marketing Service:

  • Total sales: Sales of packaged fluid milk products totaled about 3.59 billion pounds, up 0.2% from the same month a year earlier. At 17.9 billion pounds, year-to-date (YTD) sales of all fluid products were down 2.1%.
  • Conventional products: Monthly sales totaled 3.35 billion pounds, up 0.4% from the same month a year earlier. YTD sales totaled 16.7 billion pounds, down 2.2% from January-May 2022.
  • Organic products: May sales totaled 238 million pounds, down 2.2% from a year earlier. At 1.19 billion pounds, YTD sales of all fluid organic products were down 1.6%. Organic represented about 6.6% total fluid product sales in May and 6.6% YTD.

The U.S. figures are based on consumption of fluid milk products in FMMO areas, which account for approximately 92% of total U.S. fluid milk sales, and adding the other 8% from outside FMMO-regulated areas. Sales outlets include food stores, convenience stores, warehouse stores/wholesale clubs, nonfood stores, schools, the food service industry and home delivery.

Semiannual dairy cow and heifer survey: No change

Reflecting declines in recent monthly Milk Production reports, the USDA’s semiannual survey indicates the number of dairy cows and replacement heifers is unchanged from a year ago.

As of July 1, 2023, the USDA estimated the number of dairy cows calving in the past year at 9.4 million head, unchanged from July 1, 2022. Dairy replacement heifers weighing more than 500 pounds were estimated at 3.65 million, also unchanged from a year earlier.

Those numbers have changed little compared to the previous survey earlier this year. The January 2023 survey estimated cow numbers at 9.402 million and replacement dairy heifers at about 4.34 million head.

The semiannual USDA survey covers both beef and dairy cattle operations. Unlike the January report, the July data does not provide estimates for individual states.

Coming up

Check the Progressive Dairy website for other updates this week:

  • The USDA’s Ag Prices report is released July 28. It includes factors to calculate the June Dairy Margin Coverage (DMC) program margin. It will also include a quarterly summary of replacement cow prices.
  • July FMMO Class II, III and IV milk prices are announced Aug. 2. Progressive Dairy follows up with FMMO uniform prices, producer price differentials and pooling data on about Aug. 15.