Individual Federal Milk Marketing Order (FMMO) uniform milk prices were mixed in February 2024, impacted by a lower Class I base price and a large percentage of Class III milk filling the national pool. As a result, blend prices declined slightly in high Class I milk utilization areas but posted small increases elsewhere.
Administrators of the 11 FMMOs reported February prices and pooling data, March 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 January, February 2024 statistically uniform milk prices were down in the three FMMOs covering the southeastern U.S. (Table 1).
The highest uniform price for the month was in Florida at $22.88 per hundredweight (cwt), with the low in the Upper Midwest at $16.40 per cwt.
February baseline producer price differentials (PPDs) were down slightly across all applicable FMMOs (Table 1), with a high of $3.61 per cwt in the Northeast to a low of 32 cents in the Upper Midwest. PPDs have zone differentials, so actual amounts will vary within each FMMO. Milk handlers may apply PPDs and other “market adjustment factors” differently on your milk check.
Class prices for February
- Class I base price: The February 2024 advanced Class I base price was $17.99 per cwt, 49 cents less than January 2024 and $2.79 less than February a year ago.
- Class I base with zone differentials: Adding zone differentials, February Class I prices will averaged approximately $20.81 per cwt across all FMMOs, ranging from a high of $23.39 per cwt in the Florida FMMO to a low of $19.79 per cwt in the Upper Midwest FMMO.
- Class I mover formula: The spread in the monthly advanced Class III skim milk pricing factor ($4.73 per cwt) and advanced Class IV skim milk pricing factor ($9.29 per cwt) widened for February to $4.56 per cwt, the largest gap since August 2023.
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 $19.48 per cwt, about $1.49 more than the actual price determined using the “average-of plus 74 cents” formula.
- At $20.53 per cwt, the February Class II milk price was up 49 cents from January but 30 cents less than February 2023.
- At $16.08 per cwt, the Class III milk price rose 91 cents from January but was $1.70 less than February 2023.
- At $19.85 per cwt, the February 2024 Class IV milk price was up 46 cents from January and 99 cents more than February 2023. Potentially affecting FMMO pooling, the February 2024 Class IV milk price was $3.77 more than the month’s Class III milk price.
Component values, tests
Contributing to the February milk class price calculations, the value of both butterfat and protein were up from the previous month. The value of butterfat increased about 12.7 cents to $3.10 per pound. The value of milk protein rose about 10 cents from January to about $1.23 per pound.
The value of nonfat solids was steady at about $1.03 per pound, while the value of other solids increased about 3 cents, to 27.4 cents per pound.
Affecting statistical uniform prices “at test,” February average butterfat and protein tests in pooled milk were down compared to January in nearly all FMMOs providing preliminary data, offsetting the increased values.
Pooling totals
With two fewer milk marketing days, the total milk volume pooled through FMMOs in February was just over 12 billion pounds, about 898 million pounds less than January. The USDA releases preliminary February milk production estimates on March 20.
February Class I pooling was down about 411 million pounds from the previous month. At 3.3 billion pounds, it represented 27.4% of total milk pooled. Class II pooling was down about 142 million pounds to 1.11 billion pounds, representing about 9.2% of the total pooled.
Compared to a month earlier, February brought slightly less Class III and Class IV milk to the pool (Table 2). However, at 6.79 billion pounds, Class III pooling represented about 56.3% of the total pool. Class IV pooling decreased to 830 million pounds and represented 6.9% of the total milk pooled.
Looking ahead
March uniform prices and pooling totals will be announced on April 11-14. Based on FMMO advanced prices and current futures prices, milk class prices are mixed.
- Class I base price: Already announced, the March 2024 advanced Class I base price is $18.80 per cwt, 81 cents more than February 2024 but 19 cents less than March a year ago. The Class I skim milk price is up but the Class I butterfat price is lower.
- Class I base with zone differentials: Adding zone differentials, March 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.
- Class I mover formula: 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 also 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.
- Other class prices: March Class II, III and IV milk prices will be announced on April 3. As of the close of trading on March 13, the March Chicago Mercantile Exchange (CME) Class III milk futures price closed at $16.52 per cwt, up 44 cents from February. The March Class IV milk futures price closed at $19.98 per cwt, up 14 cents.
- Class III-IV milk price spread: If those futures prices hold, the March Class III-IV spread will slightly to $3.46, maintaining incentives for Class IV depooling.
Looking longer term, 2024 Class III futures prices at the close of trading on March averaged $17.35 per cwt; the Class IV futures averaged $20.33 per cwt. That would yield an average Class III-IV price spread of $2.98 per cwt, up from $2.10 per cwt in 2023 and maintaining Class IV depooling throughout the entire year.
Other information
- The national FMMO modernization process continues. Transcripts of all testimony has been posted, with any transcript corrections required by March 22. Post-hearing briefs must be submitted by April 1. Following that, the USDA has 90 days to issue a recommended decision in the Federal Register. That’s followed by a 60-day comment period and another 60 days for the USDA to develop their final decision. From there, the decision moves to a producer referendum. For more information, check the national FMMO hearing website.
- In early March, the Northeast FMMO market administrator authorized the temporary dumping of surplus milk for the period of March 15-April 15. The request, submitted by Land O’Lakes (LOL), cited a large customer in the region that informed milk suppliers they will be shutting down their plant for an extended period of time during a period that normally includes increasing seasonal milk supplies. The request cites the potential for impact to not only LOL but other dairy cooperatives in the area. Pool handlers Agri-Mark Inc., Dairy Farmers of America Inc., Maryland and Virginia Milk Producers Cooperative Inc. and Upstate Niagara Cooperative Inc. submitted remarks either in support of, or did not oppose, LOL’s request. Handlers and/or their producers that utilize the temporary policy must have been pooled on the Northeast FMMO for all their commercially marketed production for the months of July through November 2023. For dumping and payment details, click here.
- Released March 8, the USDA’s monthly World Ag Supply and Demand Estimates (WASDE) identified milk and feed factors potentially impacting dairy producer income in the year ahead. The 2024 milk production forecast was lowered from a month earlier, with improved cheese and butter price forecasts were offset by lower projected nonfat dry milk and whey prices. Compared to a month earlier, the projected Class III milk price was raised a nickel to $17.15 per cwt, and the Class IV price was lowered a dime to $20.10 per cwt. The all-milk price was raised 30 cents to $21.25 per cwt.
Read: USDA milk production lower due to lower cow inventories
Check the Progressive Dairy website for the February milk production report on March 20 and the February Dairy Margin Coverage (DMC) program margin on March 28.
