Here’s an update on economic factors impacting your dairy profitability during the first week of January 2024:

Natzke dave
Dave Natzke
Editor / Progressive Dairy

Most January FSA interest rates steady

The new year starts with something we haven’t heard in a while: Interest rates on January loans through the USDA’s Farm Service Agency (FSA) are mostly steady, with rates on operating loans lower.

January 2024 interest rates for operating and ownership loans (compared to December) are as follows:

  • Farm operating loans (direct): 5.625%, down from 5.75%
  • Farm ownership loans (direct): 5.875%, unchanged
  • Farm ownership loans (direct, joint financing): 3.875%, unchanged
  • Farm ownership loans (down payment): 1.875%, unchanged
  • Emergency Loan (amount of actual loss): 3.75%, unchanged

The FSA also offers guaranteed loans through commercial lenders at rates set by those lenders. 

Ag producer sentiment shows inflation concerns subsiding

Short- and long-term economic outlooks of most agricultural producers changed little in December, with some expectations the rate of inflation will subside, according to the latest Purdue University/CME Group Ag Economy Barometer.

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“Compared to a year earlier, far fewer producers expect inflation to exceed 6 percent in the new year, and a large majority look for inflation to average less than 4 percent in 2024," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture.

Survey respondents perceived continued improvement in their farms’ financial performances and indicated stronger cash flows and access to larger dealer supply inventories improve the outlooks for capital investment.

The Ag Economy Barometer survey collects responses from 400 producers whose annual market value of production is equal to or exceeds $500,000. Minimum targets by enterprise are as follows: 53% corn/soybeans, 14% wheat, 3% cotton, 19% beef cattle, 5% dairy and 6% hogs. Latest survey results, released Jan. 2, reflect ag producer outlooks as of Dec. 4-8.

October 2023 fluid milk sales up slightly

Overall fluid milk sales were up slightly in October 2023, with wide variation among product categories, according to monthly data from the USDA Agricultural Marketing Service (AMS):

  • Total sales: Sales of packaged fluid milk products were estimated at 3.72 billion pounds, up 1% from the same month a year earlier. At 35.3 billion pounds, year-to-date (YTD) sales of all fluid products remain down 1.5%.
  • Conventional products: Monthly sales totaled 3.47 billion pounds, up 0.9% from the same month a year earlier. YTD sales totaled 32.9 billion pounds, down 1.6% from January-October 2022. Reversing recent trends, October sales of whole milk were down 0.3% and flavored whole milk sales were down almost 13% from a year earlier. That was offset by increased sales of flavored reduced-fat milk.
  • Organic products: October sales totaled 242 million pounds, up 2.1% from a year earlier, with largest increases in whole, whole flavored, reduced-fat and reduced-fat flavored milk. At 2.36 billion pounds, YTD sales of all fluid organic products were down 1.1%. Organic represented about 6.5% total fluid product sales in October and 6.7% YTD.

The U.S. figures are based on consumption of fluid milk products in Federal Milk Marketing Order (FMMO) areas, which account for approximately 92% of total U.S. fluid milk sales, and adding the other 8% from outside FMMO-regulated areas. Sales outlets include food stores, convenience stores, warehouse stores/wholesale clubs, nonfood stores, schools, the food service industry and home delivery.

September all-milk, mailbox prices compared

National average September 2023 “mailbox” prices averaged about 78 cents per hundredweight (cwt) less than announced average “all-milk” prices for the same month:

  • September U.S. all-milk prices averaged $21 per cwt, up $1.30 from August 2023. All-milk prices are reported monthly by the USDA National Ag Statistics Service (NASS). The all-milk price is the estimated gross milk price received by dairy producers for all grades and qualities of milk sold to first buyers, before marketing costs and other deductions. The price includes quality, quantity and other premiums, but hauling subsidies are excluded.
  • September 2023 mailbox prices for selected FMMOs averaged $20.22 per cwt, up $1.27 cents per cwt from August. The mailbox price is the estimated net price received by producers for milk, including all payments received for milk sold and deducting costs associated with marketing. Mailbox prices are reported monthly by the USDA’s AMS and generally lag all-milk price announcements by a month or more.

Among major states, the difference in the September all-milk and mailbox prices was largest in Florida, Georgia, Texas and Virginia, in a range of -$1.62 to -$2.65 per cwt.

As Progressive Dairy notes each month, there’s a disclaimer of sorts. The price announcements reflect similar – but not exactly the same – geographic areas. Also, within states and FMMOs, individual milk handlers and cooperatives may include a wide range of “market adjustment factors” impacting producer-member mailbox prices.

Market cow prices dip

U.S. average prices received for cull cows (beef and dairy, combined) in November averaged $104 per cwt, down $4 from October 2023 but still $25.60 per cwt more than November 2022. The average was the lowest since May.

The USDA’s Dairy Market News noted recent auction prices for organic cull cows were somewhat higher than conventional cows in the Pacific Northwest. The average price for the top 10 organic cows auctioned was $125.85 per cwt, compared to an average price of $106.94 per cwt for auctioned top 10 conventional cows.

GDT index continues to rise

A reflection of dairy product prices worldwide, the Global Dairy Trade (GDT) price index increased 1.2% in an auction held Jan. 2, the third consecutive rise. Compared to the previous auction, prices for individual product categories were again mixed. Increases were led by a 2.1% jump in the price for butter and a 2.5%% increase in the price of whole milk powder. Price declines were noted for cheddar cheese and skim milk powder, with the price for mozzarella cheese unchanged. The next GDT auction is Jan. 16.

Coming up

Check Progressive Dairy's website for updates on these economic factors impacting your dairy:

  • December 2023 FMMO Class II, III and IV milk prices will be announced on Jan. 4. That will be followed by release of December 2023 FMMO uniform prices and pooling totals on Jan. 11-14. Look for Progressive Dairy’s summary on Jan. 15.
  • 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. Nine in-person sessions are scheduled between Jan. 10 and early March throughout the U.S. Find links for the virtual sessions, dates and locations for in-person programs and other information on the Livestock Roadshow webpage. 
  • The USDA will reconvene the national public hearing to consider proposals seeking to amend FMMO uniform pricing formulas on Jan. 16. If the hearing is not completed by Jan. 19, it will reconvene on Jan. 29, extending until Feb. 2.
  • USDA FSA staff are working on amending the Dairy Margin Coverage (DMC) program, anticipating an announcement of enrollment provisions early in calendar year 2024.

In case you missed it

  • Ag labor wages in Washington: On Jan. 1, Washington’s SB 5172 established a 40-hour workweek as the threshold over which agricultural employees must receive overtime pay, joining California and Colorado in establishing a 40-hour workweek overtime threshold for agricultural workers.