Federal Milk Marketing Order (FMMO) uniform milk prices posted small increases in August, with most areas again hitting the highest averages since the end of 2022. September-October futures prices indicate continued strength.
Administrators of the 11 FMMOs reported August prices and pooling data, Sept. 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 July, August 2024 statistically uniform milk prices were up in all 11 FMMOs (Table 1). Among individual orders, the top average was $25.81 per hundredweight (cwt) in Florida, up 15 cents. While the low average was still in the Upper Midwest, at $20.86 per cwt, it was up 82 cents from July.
August baseline producer price differentials (PPDs) were lower across all applicable FMMOs (Table 1), with a high of $1.98 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 August
- Class I base price: At $21.32 per cwt, the August 2024 advanced Class I base price was up 21 cents from July 2024 and $4.70 more than August 2023. It was again the highest Class I base price since January 2023. Through the first eight months of 2024, the Class I base price averaged $19.43 per cwt, moving above the 2023 annual average of $19.20 per cwt.
- 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 averaged 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.
- 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.
At $22.05 per cwt, the August Class II milk price was up 23 cents from July and $2.14 more than August 2023. It was the highest since December 2022.
The August Class III milk price erased a small decline in July, rising 87 cents to $20.66 per cwt, $3.47 more than August 2023 and the highest since November 2022.
At $21.58 per cwt, the August 2024 Class IV milk price was up 27 cents from July and was $2.67 more than August 2023. It’s the highest since December 2023.
Potentially affecting FMMO pooling/depooling, the August 2024 Class IV milk price was 92 cents more than the month’s Class III milk price, the smallest gap since September 2023.
Component values, tests
Contributing to the August milk class price calculations, value changes for butterfat and protein were mixed.
While the value of butterfat dipped less than a penny from July, to about $3.56 per pound, the value of milk protein jumped almost 23 cents in August to about $2.18 per pound, the highest since September 2023.
The value of nonfat solids was up about 3 cents at $1.05 per pound, while the value of other solids rose about 4 cents to 29.6 cents per pound.
Affecting statistical uniform prices “at test,” August average butterfat and protein tests in pooled milk were higher compared to July in nearly all FMMOs providing preliminary data. Somatic cell counts were also up slightly.
Pooling totals
With July and August both containing 31 milk marketing days, the total milk volume pooled through FMMOs was also similar. Total milk pooled in August was estimated at 12.96 billion pounds, about 260 million pounds more than the prior month. The USDA releases preliminary August milk production estimates on Sept. 20.
August Class I pooling was up about 237 million pounds from the previous month. At 3.45 billion pounds, it represented about 27% of total milk pooled. Class II pooling was up about 109 million pounds, to 1.43 billion pounds, representing about 11.1% of the total pooled.
Compared to a month earlier, August brought a little less Class III milk to the pool, but Class IV milk volume was up (Table 2). At 7.12 billion pounds, Class III pooling was down 262 million pounds and represented about 54.9% of the total pool. Class IV pooling increased nearly 177 million pounds, to 955 million pounds, and represented 7.4% of the total milk pooled. After hitting an 11-year low in July, the Class IV milk FMMO pooling volume was the highest since last March.
Looking ahead
September uniform prices and pooling totals will be announced on Oct. 11-14. Based on FMMO advanced prices and current futures prices, the outlook for September milk prices is brighter.
- Class I base price: Already announced, the September 2024 advanced Class I base price is $21.60 per cwt, up 28 cents from August 2024 and $2.70 more than September 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, September Class I prices will average approximately $24.42 per cwt across all FMMOs, ranging from a high of $27 per cwt in the Florida FMMO to a low of $23.40 per cwt in the Upper Midwest FMMO.
- Class I mover formula: The spread in the monthly advanced Class III skim milk pricing factor ($8.10 per cwt) and advanced Class IV skim milk pricing factor ($9.39 per cwt) narrowed for September to $1.29 per cwt. That means that – for the second time in the past three months – the current Class I mover formula positively impacted Class I prices.
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 10 cents less than the actual price determined using the average-of plus 74 cents formula.
- Other class prices: September Class II, III and IV milk prices will be announced on Oct. 2. As of trading on Sept. 13, the Chicago Mercantile Exchange (CME) Class III milk futures price closed at $23.21 per cwt for September, which would be up $2.55 from the August price and the highest since June 2022. The Class IV milk futures price closed at $22.34 per cwt for September, up 76 cents from August.
Looking even further ahead to the fourth quarter of 2024, Class III-IV futures prices could continue to hold or strengthen.
If Class III-IV futures prices hold, the September Class III-IV milk price gap will shrink to 87 cents per cwt, with Class III jumping above Class IV, creating the potential for Class III depooling.
Other information
The USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report was released on Sept. 12. Milk production forecasts for both 2024 and 2025 were lowered from last month based on lower projected cow inventories and slower growth rate of milk per cow for the remainder of 2024. The slower growth in milk output per cow is expected to carry over into 2025.
The 2024 Class III milk average price is now forecast at $19.45 per cwt; the Class IV price is projected at $21 per cwt. The all-milk price forecast is $23.05 per cwt. Looking ahead to 2025, the Class III milk price is forecast at $19.60 per cwt, and the Class IV price is projected at $21.20 cwt. The 2025 all-milk price is forecast at $23.45 per cwt.
Check the Progressive Dairy website later this month for milk production, cull cow marketing, risk management and Dairy Margin Coverage (DMC) program margin updates.
