Federal Milk Marketing Order (FMMO) Class IV milk pooling trends continued into November, while weaker uniform prices were offset somewhat by higher butterfat and protein tests.
Administrators of the 11 FMMOs reported November 2023 prices and pooling data, Dec. 11-14. Here’s Progressive Dairy’s monthly review of the numbers to provide some additional transparency to your milk check.
Uniform prices, PPDs
Compared with October, November 2023 statistically uniform milk prices were down slightly in 10 of 11 FMMOs (Table 1), with a small 20-cent increase in the Upper Midwest FMMO. Largest declines were in high Class I utilization areas, down 70-91 cents in Appalachian, Florida and Southeast FMMOs.
The highest uniform price for the month was in Florida at $24.08 per hundredweight (cwt), with the low in the Upper Midwest at $17.48 per cwt.
November baseline producer price differentials (PPDs) were also down across all applicable FMMOs (Table 1), with a high of $3.59 per cwt in the Northeast to a low of 33 cents in the Upper Midwest. PPDs have zone differentials, so actual amounts will vary within each FMMO. And milk handlers may apply “market adjustment factors” differently on your milk check.
Class prices for November
- Class I base price: At $19.75 per cwt, it was up 28 cents from October but still $4.34 less than November 2022.
- Class I base with zone differentials: Adding zone differentials, November Class I prices averaged approximately $22.57 per cwt across all FMMOs, ranging from a high of $25.15 per cwt in the Florida FMMO to a low of $21.55 per cwt in the Upper Midwest.
- Class I mover formula: 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 also 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.
- At $21.21 per cwt, the November Class II milk price was down 74 cents from October and $3.46 less than November 2022.
- At $17.15 per cwt, the Class III milk price rose 31 cents from October. It’s $3.86 less than November 2022.
- At $20.87 per cwt, the November 2023 Class IV milk price was down 62 cents from October and $2.43 less than November 2022. Affecting FMMO pooling, the November 2023 Class IV milk price is $3.72 more than the month’s Class III milk price.
Component values, tests
Contributing to the November milk class price calculations, the value of butterfat dipped while the value of protein rose slightly. The value of butterfat fell about 25 cents to $3.46 per pound, the fourth straight month above $3 per pound. The value of milk protein rose nearly 28 cents from October to about $1.32 per pound in November. The value of nonfat solids rose slightly to about $1.01 per pound, while the value of other solids increased about 6 cents, to 19 cents per pound.
Affecting statistical uniform prices “at test,” November average butterfat and protein tests in pooled milk were up in all FMMOs providing preliminary data. In most areas, butterfat tests were up more than 0.1% from October and protein tests were up 0.07%, and both were likely the highest since January.
Pooling totals
With one less marketing day in November compared to October, Class I pooling was down about 25.6 million pounds. At 3.51 billion pounds, it represented just over 28% of total milk pooled. Class II pooling was down about 113.6 million pounds, to 1.2 billion pounds, representing about 9.7% of the total pooled.
Compared to a month earlier, November brought less Class III milk to the pool, while pooling of higher-value Class IV milk increased slightly. At 6.84 billion pounds, Class III pooling represented about 55.2% of the total pool (Table 2). Class IV pooling increased to 836.5 million pounds and represented 6.8% of the total milk pooled (Table 2), the third-lowest volume and percentage in the past two years.
The USDA releases November milk production estimates on Dec. 18. Based on the FMMO data, the volume of milk pooled during the month was 12.39 billion pounds, down about 411 million pounds from October.
Looking ahead
December 2023 uniform prices and pooling totals will be announced on Jan. 11-14, 2024. Based on FMMO advanced prices and current futures prices, the current price outlook is for prices to move lower.
- Class I base price: Already announced, the December 2023 advanced Class I base price is $19.76 per cwt, up a penny from November and a 10-month high but still $4.46 less than December 2022.
- Class I base with zone differentials: Adding zone differentials, December Class I prices will average approximately $22.58 per cwt across all FMMOs, ranging from a high of $25.16 per cwt in the Florida FMMO to a low of $21.56 per cwt in the Upper Midwest FMMO.
- Class I mover formula: The spread in the monthly advanced Class III skim milk pricing factor ($5.34 per cwt) and advanced Class IV skim milk pricing factor ($9.08 per cwt) narrowed slightly for December to $3.74 per cwt. It was still the third-widest monthly spread for the year.
Based on Progressive Dairy calculations, the Class I mover calculated under the higher-of formula would also have resulted in a Class I base price of $20.85 per cwt, about $1.09 more than the actual price determined using the average-of plus 74 cents formula.
For the year, the spread in the advanced Class III-IV skim milk factor was $2.15 per cwt. Based on Progressive Dairy calculations, the 2023 Class I mover calculated under the higher-of formula would also have resulted in a Class I base price of $19.44 per cwt, about 24 cents more than the actual price determined using the average-of plus 74 cents formula.
- Other class prices: December Class II, III and IV milk prices will be announced on Jan. 4, 2024. As of the close of trading on Dec. 14, the December Chicago Mercantile Exchange (CME) Class III milk futures price closed at $16.20 per cwt, down 95 cents from November. The December Class IV milk futures price closed at $19.08 per cwt, down $1.79 from November.
- Class III-IV milk price spread: If those futures prices hold, the December Class III-IV spread will be $2.88, extending incentives for Class IV depooling.
Looking longer term, 2024 Class III futures prices at the close of trading on Dec. 14 averaged $17.87 per cwt; Class IV futures averaged $19.46 per cwt. That would yield an average Class III-IV price spread of $1.59 per cwt, maintaining Class IV depooling throughout the year.
Other factors
The USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report was released on Dec. 8. Milk production forecasts for 2023 and 2024 were reduced, but milk price projections were also lowered from the previous month. Read: Reduced milk per cow, cow numbers lower USDA 2023-24 milk production estimates
Also, check the Progressive Dairy website for the USDA's November Milk Production report on Dec. 19 and the November Dairy Margin Coverage (DMC) program margin on Dec. 29. Also, watch for details on enrolling in the 2024 DMC program in early January.
