Here’s an update on economic factors impacting your milk check as we move into mid-October:
- Dairy Forward Pricing Program has expired, for now
- CoBank: High interest rates, strong dollar take oversized toll on ag and rural economies
- Legal webinar: Dairy risk management programs
- Coming up
- In case you missed it
Dairy Forward Pricing Program has expired, for now
With congressional failure to approve a 2023 Farm Bill, new milk supply contracts under the Dairy Forward Pricing Program are no longer authorized. Contracts established on or before Sept. 30, 2023, that extend through Sept. 30, 2026, are not impacted.
Under the Dairy Forward Pricing Program, any eligible milk handler may enter into forward contracts with producers or cooperatives for the handler's eligible Class II, III and IV volume of milk. That milk under forward contract is exempt from Federal Milk Marketing Order (FMMO) minimum milk pricing requirements for the time period covered by the contract.
Under the 2018 Farm Bill, the program was last authorized through Sept. 30, 2023. Beginning Oct. 1, 2023, the authority or funding for the USDA to carry out the program expired. Therefore, proprietary handlers establishing new forward contracts on or after Oct. 1, 2023, will not be exempt from paying minimum FMMO order prices.
CoBank: High interest rates, strong dollar take oversized toll on ag and rural economies
The combination of high interest rates and a strong U.S. dollar is beginning to take a disproportionate toll on rural industries like agriculture, according to a new quarterly report from CoBank’s Knowledge Exchange.
The stronger U.S. economic position relative to China, European and other countries challenges U.S. industries reliant on export markets, said CoBanks’ Rob Fox. When combining the loss of exports with a general slowdown in the U.S. economy, it’s a double whammy for many businesses operating in rural America.
Specific to dairy, strong cheese production and slowing dairy exports combined to pull Class III milk prices down to a paltry $13.77 per hundredweight by midsummer. With ample cheese and strong milk production, Midwest spot loads of Class III milk bottomed out much lower than the five-year average. Faced with low milk prices and high feed costs, dairy farmers sent more cows to slaughter to take advantage of record-high beef prices. Futures markets indicate that the final quarter of the year could be better. The biggest wild card for milk prices is China, the world’s leading dairy product importer, which is facing an economic downturn.
According to the report, 2023 Farm Bill negotiations will take a back seat while the House of Representatives attempts to select a new speaker and Congress works to pass its annual appropriations bills before the Continuing Resolution expires on Nov. 17. The most likely outcome is an agreement by year-end to extend the current farm bill by a few months or up to a year or more.
Legal webinar: Dairy risk management programs
Penn State’s Center for Agricultural and Shale Law continues its Quarterly Dairy Legal Webinar series, Oct. 17, with a free one-hour webinar covering dairy risk management and income and revenue protection programs.
Beginning at noon (Eastern time), this webinar will provide discussions on the following programs: Dairy Margin Coverage (DMC), Dairy Revenue Protection (Dairy-RP), Livestock Gross Margin for Dairy (LGM-Dairy), Dairy Indemnity Payment, Dairy Donation, Market Volatility Assistance, Organic Dairy Marketing Assistance and the Milk Loss Program (MLP). Participation includes one hour of substantive continuing legal education (CLE) credit available for Pennsylvania-licensed attorneys at no charge. Advance registration is requested.
Coming up
Additional dairy economic reports coming up at Progressive Dairy’s deadline:
- September FMMO uniform prices, producer price differentials and pooling data is released Oct. 11-14. For analysis and a summary, check the Progressive Dairy website on Oct. 16.
- The USDA will release preliminary September milk production estimates on Oct. 19. For analysis and a summary, check the Progressive Dairy website later that day.
In case you missed it
Other recent articles posted on Progressive Dairy’s website:
- Editor's update: Oct. 30 is the new deadline to sign up for the Milk Loss Program (MLP). The program provides financial assistance to eligible dairy operations for milk that was dumped or removed without compensation from the commercial milk market during calendar years 2020, 2021 and 2022. (Read: Weekly Digest: Are you eligible for Milk Loss Program assistance? and Weekly Digest: Milk Loss Program’s frequently asked questions)
- The USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report was released Oct. 12. The milk production forecast for 2023 was raised from last month on slightly more milk output per cow, while the forecast for 2024 was unchanged. Price outlooks were mixed. (Read: USDA forecast offers mixed outlook for milk prices)
