Here’s an update on economic factors impacting your dairy profitability as we approach Christmas of 2023.

Natzke dave
Dave Natzke
Editor / Progressive Dairy

January 2024 Class I base price weakens

The Federal Milk Marketing Order (FMMO) advanced Class I base price is weaker to start the new year. At $18.48 per hundredweight (cwt), the January 2024 price is $1.28 less than December 2023 and $3.93 less than January a year ago.

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, January Class I prices will average approximately $21.30 per cwt across all FMMOs, ranging from a high of $23.88 per cwt in the Florida FMMO to a low of $20.28 per cwt in the Upper Midwest FMMO.

The spread in the monthly advanced Class III skim milk pricing factor ($5.74 per cwt) and advanced Class IV skim milk pricing factor ($9.25 per cwt) narrowed slightly for January to $3.51 per cwt.

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 $19.46 per cwt, about 98 cents more than the actual price determined using the “average-of plus 74 cents” formula.

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The Class I base averaged $19.20 per cwt in 2023, down $4.46 from 2022.

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.

USDA schedules risk management workshops

The USDA’s Risk Management Agency (RMA) is hosting about a dozen in-person and virtual workshops this winter for producers to learn about new and expanded livestock risk management products, including Dairy Revenue Protection (Dairy-RP) and Livestock Gross Margin for Dairy (LGM-Dairy).

Two virtual “Livestock Roadshow” events are scheduled online, Jan. 8 and Jan. 17, 2024. Nine in-person sessions are scheduled between Jan. 10-early March throughout the U.S.

Session topics include the following USDA RMA programs: Annual Forage; Dairy Revenue Protection; Livestock Gross Margin; Livestock Risk Protection; Pasture, Rangeland and Forage; and Weaned Calf Risk Protection.

Find links for the virtual sessions, dates and locations for in-person programs and other information on the Livestock Roadshow webpage.

Also, watch for Progressive Dairy’s January 2024 risk management calendar next week.

Vitaliano: Production lags domestic use

Lower milk production has prompted a drawdown in dairy product inventories even though demand remains flat, according to National Milk Producers Federation’s (NMPF) Peter Vitaliano. Summarizing dairy markets in the December 2023 Dairy Management Inc./National Milk Producers Federation Dairy Market Report, he said growth in domestic commercial use of milk in all products was offset by a drop in the volume of U.S. dairy exports. However, even that level of demand still outpaced milk production during the period.

For a look back at commercial use, dairy trade, milk production, product inventories, prices and margins, read NMPF's latest Dairy Market Report.

GDT index increases again

A reflection of dairy product prices worldwide, the Global Dairy Trade (GDT) price index increased in an auction held Dec. 19. Compared to the previous auction, prices for individual product categories were mixed.

GDT increases were led by a 9.9% jump in the price for butter (to about $2.48 per pound) and a 6.9% increase in the price of cheddar cheese (about $1.93 per pound).

Impacting U.S. export competitiveness, the GDT butter price was about 13 cents less than the comparable Chicago Mercantile Exchange (CME) cash butter price, according to Erick Metzger, with National All-Jersey. In contrast, the CME cheddar price of $1.46 per pound was substantially lower than the GDT price.

Others posting smaller price increases were anhydrous milkfat and whole milk powder. Price declines were noted for mozzarella cheese and skim milk powder.

The next GDT auction is Jan. 2, 2024.

Organic Valley added 84 dairy farms in 2023

Recapping 2023, Organic Valley announced it added 84 dairy farms during the year and was open to welcoming new organic milk suppliers in 2024. Geographically, the cooperative added 26 organic family farms from Pennsylvania, a dozen more from Wisconsin, 22 in New York, six from Ohio and several others from Indiana, Iowa, Maryland, Michigan, Minnesota and Vermont.

Coming up

  • The November Dairy Margin Coverage (DMC) margin and potential indemnity payments will be released on Dec. 29. As of the close of CME futures trading on Dec. 18, the DMC decision tool forecast a November margin of $9.45 per cwt, up just a penny from October’s margin of $9.44 per cwt. December’s margin, to be announced at the end of January, is currently forecast at $8.87 per cwt, which would trigger small indemnity payments at Tier I $9 and $9.50 coverage levels. 
  • As a reminder, USDA Farm Service Agency (FSA) staff anticipate an announcement of calendar year 2024 DMC program enrollment provisions early in the new year.

In case you missed it

  • The USDA opened the enrollment period on Dec. 18 for 2024 crop year participation in the FSA’s Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. The deadline to complete enrollment and any election change is March 15, 2024. If producers do not submit their revisions by that deadline, their election remains the same as 2023.
  • The USDA began issuing more than $223 million in Pandemic Assistance Revenue Program (PARP) payments to agricultural producers who suffered a 15% or greater decrease in allowable gross revenue due to the COVID-19 pandemic for the 2020 calendar year. The PARP application period closed on July 14, 2023.

 Watch for other dairy news on the Progressive Dairy website.