Here is a brief look at the news affecting dairy producers during the third week of October 2023:
Digest highlights
- GDT index increases again
- November 2023 Class I base price increases
- U.S. ag outlook improving
- In case you missed it
- Coming up
GDT index increases again
Global dairy prices are strengthening, with the Global Dairy Trade (GDT) index posting a fourth consecutive increase in an auction held Oct. 17. Compared to the previous auction, prices in individual product categories were all higher: skim milk powder (SMP) and whole milk powder were both up about 4%, anhydrous milkfat was up 7%, butter was up about 3%, and lactose and cheddar cheese were up 0.2%.
The GDT platform offers dairy products from several global companies: Fonterra (New Zealand), Darigold, Valley Milk and Dairy America (U.S.), Amul (India), Arla (Denmark), Arla Foods Ingredients (Denmark) and Polish Dairy (Poland). The next GDT auction is Nov. 7.
November 2023 Class I base price increases
The Federal Milk Marketing Order (FMMO) advanced Class I base price rose further in November, reaching a 10-month high. At $19.75 per hundredweight (cwt), it is up 28 cents from October but is still $4.34 less than November 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, November Class I prices will average approximately $22.57 per cwt across all FMMOs, ranging from a high of $25.15 per cwt in the Florida FMMO 6 to a low of $21.55 per cwt in the Upper Midwest FMMO 30.
The spread in the monthly advanced Class III skim milk pricing factor ($4.29 per cwt) and advanced Class IV skim milk pricing factor ($8.70 per cwt) rose dramatically for November, to $4.41 per cwt, the widest spread since August.
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 $21.16 per cwt, about $1.41 more than the actual price determined using the “average-of plus 74 cents” formula.
U.S. ag outlook improving
Agriculture leaders anticipate the overall economic conditions of the U.S. will improve in the next 12 months despite lingering economic concerns.
Responding to a nationwide survey of small and middle market companies, conducted by Umpqua Bank, more than half of those from the agricultural sector are optimistic about future economic conditions, and 59% expect revenues to increase.
While climate change is among the concerns the agriculture sector has identified, it is also facing other immediate challenges. The top worries (by order of importance) were rising interest rates, access to financing, staffing, inflation and disruptions due to technology innovation.
Umpqua Bank is a regional bank in the western U.S. with offices in Oregon, Washington, California, Idaho, Nevada, Utah, Arizona and Colorado. For more, read the 2023 Business Barometer report.
In case you missed it
Returning to the U.S. for the first time in 30 years, the International Dairy Federation’s (IDF) World Dairy Summit was held in Chicago, Oct. 16-19. Both IDF and the U.S. Dairy Export Council (USDEC) provided online coverage.
Coming up
The USDA’s preliminary Milk Production report for September was released after Progressive Dairy’s digital newsletter deadline, Oct. 19. Find a summary and analysis in the news section of the Progressive Dairy website.
