Here’s an update on economic factors impacting your dairy’s financial picture as we finish out February 2024.
- March 2024 Class I base price improves
- December, full-year 2023 fluid milk sales lower
- Is another funding extension likely?
- USDEC outlines 2024’s principal market factors
March 2024 Class I base price improves
The Federal Milk Marketing Order (FMMO) advanced Class I base price is moving back up in March. At $18.80 per hundredweight (cwt), the March 2024 price is 81 cents more than February 2024 but 19 cents less than March a year ago.
Through the first quarter of 2024, the Class I base prices averaged $18.42 per cwt, a three-year low for the period.
Class I zone differentials are added to the base price at principal pricing points to determine the actual Class I price in each FMMO. With those additions, February Class I prices will average approximately $21.62 per cwt across all FMMOs, ranging from a high of $24.20 per cwt in the Florida FMMO to a low of $20.60 per cwt in the Upper Midwest FMMO.
The spread in the monthly advanced Class III skim milk pricing factor ($5.38 per cwt) and advanced Class IV skim milk pricing factor ($9.41 per cwt) narrowed slightly for March but remained wide at $4.03 per cwt.
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 $20.02 per cwt, about $1.22 more than the actual price determined using the “average-of plus 74 cents” formula.
December, full-year 2023 fluid milk sales lower
December 2023 fluid milk sales were down from the same month a year earlier, closing out another year of declining overall sales. According to data from the USDA Agricultural Marketing Service:
- Total sales: December 2023 sales of packaged fluid milk products were estimated at 3.66 billion pounds, down 2.8% from the same month a year earlier. At 42.63 billion pounds, total-year sales of all fluid products were down 1.5%.
- Conventional products: Monthly sales totaled 3.42 billion pounds, down 3.4% from the same month a year earlier. Flavored whole milk was the only major category to post an increase during the month, up 9.2%. Total 2023 sales were estimated at 39.79 billion pounds, down 1.6% from 2022. Whole milk sales were up 1%, at 14.97 billion pounds.
- Organic products: December sales totaled 245 million pounds, up 6.8% from a year earlier, with largest increases in whole and flavored whole milk categories. At 2.84 billion pounds, 2023 total sales of all fluid organic products were down 0.3%, with declining sales in all major categories except whole milk. Organic represented about 6.6% total fluid product sales in December and the full year.
The U.S. figures are based on consumption of fluid milk products in 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.
Is another funding extension likely?
Both chambers of Congress will be back in Washington D.C. this week, and keeping the federal government operating is presumably going to be top priority.
The Senate is scheduled to hold floor sessions Feb. 26 – March 1 and March 5-8. The House is set to hold floor sessions on Feb. 28 – March 1 and March 5-8.
Meanwhile, two budgetary deadlines are on the calendar, with extension of continuing resolutions (CR) appearing most likely.
Four appropriations bills are scheduled to expire on March 1. They cover: Agriculture, Rural Development, Food and Drug Administration; Energy and Water Development; Military Construction, Veterans Affairs; and Transportation, Housing and Urban Development.
Eight appropriations bills are scheduled to expire on March 8. They cover: Commerce, Justice and Science; Defense; Financial Services and General Government; Homeland Security; Interior and Environment; Labor, Health and Human Services and Education; Legislative Branch; and State and Foreign Operations.
USDEC outlines 2024’s principal market factors
Analysts with the U.S. Dairy Export Council (USDEC) have identified five influencing factors for dairy trade in the year ahead. As outlined in the U.S. Dairy Exporter Blog, these key points to watch are China, Mexico, the global economy, milk production in Europe and New Zealand, and U.S. dairy’s expansion appetite.
- China has maintained its position as the largest dairy importer in the world, but its future growth trajectory remains murky with pessimistic views on China’s economy. A slowdown in the country’s gross domestic product (GDP) is likely to weigh on Chinese dairy consumption. The uncertainty of the local milk supply also adds to questions that surround China’s need for dairy imports.
- 2023 was an exceptionally high year for U.S. dairy exports to Mexico, which helped compensate for slower exports to other U.S. dairy product destinations. The outlook for exports to Mexico continues to look positive despite an anticipated slowdown in the country’s GDP growth.
- With cooling inflation and the potential for a conservative approach to lowering interest rates, the outlook for the global economy is looking a little better than expected. Since there is a clear connection between economic well-being and dairy consumption, this could be a sign toward dairy demand getting back on track, albeit unlikely to rebound to 2022’s pre-inflation levels.
- Pricing factors led the push for more milk production in Europe while the weather was favorable in New Zealand. Continued growth into 2024 is looking modest but will be enough to lead to competition for the U.S. from these large dairy exporters in key markets around the world.
- Tight margins, lack of replacement heifers and high interest rates are limiting factors for dairy expansion in the U.S. The level of milk production in the U.S. will limit exportable supplies.
