Like recent months, checks for July milk marketings for many dairy farmers will reflect weak protein and Class III milk prices. And, the wide price spread between Class III-IV milk prices means Class IV depooling will remain heavy. It won't ease the financial pain, but August milk prices should start to improve.
July class prices
July 2023 Federal Milk Marketing Order (FMMO) pooling estimates, uniform prices and producer price differentials (PPDs) are scheduled to be released beginning on Aug. 11-14. Two of four milk class prices declined from June, with another significant drop in the Class III price.
Class prices announced on Aug. 2 were:
- At $19.12 per hundredweight (cwt), the July Class II milk price is up 29 cents from June but $7.54 less than July 2022.
- At $13.77 per cwt, the Class III milk price fell $1.14 from June and is $8.75 less than July 2022. It’s the lowest since May 2020.
- At $18.26 per cwt, the July 2023 Class IV milk price is unchanged from June but is $7.53 less than July 2022.
Potentially affecting FMMO pooling, the July 2023 Class IV milk price is $4.49 more than the month’s Class III milk price, the widest spread since last September, and providing continued incentives for Class IV depooling.
In addition to Class II-III-IV prices announced above, the July 2023 advanced Class I base price was previously announced at $17.32 per cwt, down 69 cents from June and $8.55 less than July 2022. It’s the lowest since November 2021.
Protein value bottoming out
Contributing to the July milk class price calculations, the butterfat value increased slightly, while the value of protein fell to the lowest level since February 2019.
- The value of butterfat rose nearly 4 cents to about $2.80 per pound, the highest since December 2022. It’s still the seventh consecutive month the value of butterfat was below $3 per pound.
- The value of milk protein fell 31.5 cents from June to about $1.20 per pound, the lowest since December 2018-February 2019.
- The value of nonfat solids dipped 1.5 cents, to about 97.5 cents per pound, while the value of other solids dropped almost 6 cents, to just under 7 cents per pound, the lowest since April 2018.
Looking ahead
Based on FMMO advanced prices and current futures prices, milk prices should start to recover somewhat in August, although it will be a struggle.
Already announced, the August advanced Class I base price is $16.62 per cwt, down 70 cents from July and $8.51 less than August 2022. It’s the lowest level since September 2021.
However, as of trading on Aug. 2, the Chicago Mercantile Exchange (CME) Class III milk futures price closed at $17.49 per cwt for August, up $3.72 from July. The Class IV milk futures price closed at $18.81 per cwt for August, up 55 cents from July.
If those prices hold, the August Class III-IV milk price gap will dip to $1.32 per cwt, shrinking but not eliminating incentives to depool Class IV milk.
