Individual Federal Milk Marketing Order (FMMO) uniform milk prices rose in 10 of 11 orders in July, in some areas again hitting the highest averages since the end of 2022. In contrast, with the Class III-Class IV milk price spread widening, Class IV milk pooling hit the lowest volume and percentage since the final quarter of 2013.
Administrators of the 11 FMMOs reported July prices and pooling data, Aug. 10-14. Here’s Progressive Dairy’s monthly review of the numbers to provide some additional transparency to your milk check.
Uniform prices, PPDs
Compared with June, July 2024 statistically uniform milk prices were up in all but one FMMO, the Upper Midwest (Table 1). High Class I milk utilization orders posted largest increases, with a top average of $25.66 per hundredweight (cwt) in Florida. With its high Class III milk utilization, the Upper Midwest uniform price was $20.04 per cwt, down a penny from June.
July baseline producer price differentials (PPDs) were up across all applicable FMMOs (Table 1), with a high of $2.47 per cwt in the Northeast to a low of 25 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 July
- Class I base price: At $21.11 per cwt, the July 2024 advanced Class I base price was up $1.03 from June 2024 and $3.79 more than a year ago. It’s the highest Class I base price since January 2023.
- Class I base with zone differentials: 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, July Class I prices averaged approximately $23.93 per cwt across all FMMOs, ranging from a high of $26.51 per cwt in the Florida FMMO to a low of $22.91 per cwt in the Upper Midwest FMMO.
- Class I mover formula: For the first month since last October, the 2018 Farm Bill change to the Class I pricing formula paid a small dividend for producers. The spread in the monthly advanced Class III skim milk pricing factor ($7.72 per cwt) and advanced Class IV skim milk pricing factor ($8.93 per cwt) narrowed for July to $1.21 per cwt, the smallest gap since October 2023.
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 $20.97 per cwt, about 14 cents less than the actual price determined using the “average-of plus 74 cents” formula.
- At $21.82 per cwt, the July Class II milk price was up 22 cents from June and $2.70 more than July 2023. It’s the highest since October 2023.
- After hitting an 18-month high in June, the Class III milk price dipped 8 cents to $19.79 per cwt in July but was still $6.02 more than July 2023.
- At $21.31 per cwt, the July 2024 Class IV milk price was up 23 cents from June and is $3.05 more than July 2023. It’s also the highest since October 2023.
As evident in FMMO pooling data, the July 2024 Class IV milk price was $1.52 more than the month’s Class III milk price, up from $1.21 in June and adding depooling incentives.
Component values, tests
Contributing to the July milk class price calculations, value changes for butterfat and protein were also mixed.
The value of butterfat increased about 2.8 cents from June, moving above $3.57 per pound. The value of milk protein fell more than a dime to $1.95 per pound.
The value of nonfat solids was up about 1.5 cent at $1.01 per pound, while the value of other solids rose about 2.5 cents to 25.7 cents per pound.
Affecting statistical uniform prices “at test,” July average butterfat and protein tests in pooled milk were down compared to June in nearly all FMMOs providing preliminary data. Somatic cell counts were up slightly.
Pooling totals
With one more milk marketing day compared with June, the total milk volume pooled through FMMOs in July was estimated at 12.7 billion pounds, about 425 million pounds more than the prior month. The USDA releases preliminary July milk production estimates on Aug. 21.
July Class I pooling was up about 248 million pounds from the previous month. At 3.22 billion pounds, it represented 25% of total milk pooled. Class II pooling was up about 135 million pounds, to 1.33 billion pounds, representing about 10.4% of the total pooled.
Compared to a month earlier, July brought more Class III milk to the pool but Class IV milk volume was down (Table 2). At 7.38 billion pounds, Class III pooling was up 218 million pounds and represented about 58.1% of the total pool. Class IV pooling declined nearly 172 million pounds, to 778 million pounds, and represented 6.1% of the total milk pooled.
Both Class IV milk FMMO pooling volume and percentage were the lowest in nearly 11 years, since the fourth quarter of 2013. That doesn’t mean total milk production wasn’t used in Class IV products, only that it wasn’t pooled across FMMOs.
Looking ahead
August uniform prices and pooling totals will be announced on Sept. 11-14. Based on FMMO advanced prices and current futures prices, the outlook for August milk prices is brighter.
- Class I base price: Already announced, the August 2024 advanced Class I base price is $21.32 per cwt, up 21 cents from July 2024 and $4.70 more than August 2023. It’s again the highest Class I base price since January 2023.
- Class I base with zone differentials: 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, August Class I prices will average approximately $24.14 per cwt across all FMMOs, ranging from a high of $26.72 per cwt in the Florida FMMO to a low of $23.12 per cwt in the Upper Midwest FMMO. The impact on August FMMO uniform prices will be seen in early September.
- Class I mover formula: The spread in the monthly advanced Class III skim milk pricing factor ($7.48 per cwt) and advanced Class IV skim milk pricing factor ($9.20 per cwt) widened for August to $1.72 per cwt. Based on Progressive Dairy calculations, using the Class I mover calculated under the higher-of formula would have resulted in a Class I base price about 12 cents more than the actual price determined using the average-of plus 74 cents formula.
A change in the formula back to higher-of calculations is included in both the FMMO modernization proposal and in preliminary versions of House and Senate farm bills.
- Other class prices: August Class II, III and IV milk prices will be announced Sept. 5. As of trading on Aug. 14, the Chicago Mercantile Exchange (CME) Class III milk futures price closed at $20.51 per cwt for August, which would be up 72 cents from the July price. The Class IV milk futures price closed at $21.63 per cwt for August, up 23 cents from July.
If Class III-IV futures prices hold, the August Class III-IV milk price gap will shrink to $1.12 per cwt but still leaves open the door to continue Class IV depooling.
Other information
- The USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report was released on Aug. 12. Milk production forecasts for both 2024 and 2025 were again lowered from last month based on slower growth in milk output per cow more than offsetting higher cow inventory numbers. Annual all-milk prices could average about $22.50 per cwt across the two-year period.
- What’s the value of cropland in your state? Progressive Dairy provides its annual look at state cropland values, ranked by value per acre, as well as cropland rent per acre and annual rent as a percentage of average value.
- June’s dairy exports slipped 0.3% from a month prior as gains in cheese and whey offset other dairy product declines.
Check the Progressive Dairy website later this month for milk production, cull cow marketing, risk management and Dairy Margin Coverage (DMC) program margin updates.
