Federal Milk Marketing Order (FMMO) uniform milk prices increased in September, in most areas hitting the highest averages since the end of 2022. October-December futures prices suggest September uniform prices could likely be the peak for the year.
Administrators of the 11 FMMOs reported August prices and pooling data, Oct. 11-13. Here’s Progressive Dairy’s monthly review of the numbers to provide some additional transparency to your milk check.
Uniform prices, PPDs
Compared with August, September 2024 statistically uniform milk prices continued to climb in all 11 FMMOs (Table 1). Among individual orders, the top average was $26.19 per hundredweight (cwt) in Florida, up 93 cents from August and the highest since December 2022. While the low average was in the Upper Midwest at $23.10 per cwt, it was up $2.24 from August and the highest since June 2022.
While the news was good for prices, base producer price differentials (PPDs) turned negative in nearly all applicable FMMOs in September and were down substantially from August (Table 1). Only the Northeast maintained a positive base PPD in September. However, PPDs have zone differentials, so actual amounts will be even lower within each FMMO. Milk handlers may apply PPDs and other “market adjustment factors” differently on your milk check.
For background information on PPDs, read Producer price differentials and why they may be negative
Class prices for September
- Class I base price: At $21.60 per cwt, the September advanced Class I base price was up 28 cents from August 2024 and $2.70 more than September 2023. It was 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 averaged 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 meant – 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.
- At $22.40 per cwt, the September Class II milk price was up 35 cents from August and $2.42 more than September 2023. It was the highest since December 2022.
- The September Class III milk price jumped $2.63 from August to $23.34 per cwt. That was up $4.95 from September 2023 and the highest since June 2022.
- At $22.29 per cwt, the September 2024 Class IV milk price was up 71 cents from August and was $3.20 more than September 2023. It was the highest since November 2022.
Potentially affecting FMMO pooling, the September 2024 Class III milk price was $1.05 more than the month’s Class IV milk price, the first reversal since April 2023, with a large impact on pooling/depooling.
Component values, tests
Contributing to the September milk class price calculations, value changes for butterfat and protein were both up from a month earlier.
The value of butterfat rose about a nickel from August to about $3.61 per pound. The value of milk protein jumped almost 75 cents to more than $2.92 per pound, the highest since June 2022.
The value of nonfat solids was up more than 6 cents at $1.11 per pound, while the value of other solids rose about 5 cents to 34.3 cents per pound.
Affecting statistical uniform prices “at test,” September average butterfat and protein tests in pooled milk were higher compared to August in many FMMOs providing preliminary data. Somatic cell counts were also down slightly, providing additional price support.
Pooling totals
With one less marketing day compared with August, the total milk volume pooled through FMMOs in September was estimated at 10.68 billion pounds, about 2.28 billion pounds less than the prior month. The USDA releases preliminary September milk production estimates on Oct. 21.
One less marketing day wasn’t the primary factor impacting pooling volume. With the Class III milk price jumping above the Class IV milk price, depooling and repooling of those two milk classes were also impacted substantially.
September Class I pooling was down about 131 million pounds from the previous month. At 3.32 billion pounds, it represented about 31% of total milk pooled. Class II pooling was up about 424 million pounds, to 1.86 billion pounds, representing about 17.4% of the total pooled.
With the price inversion, September brought far less Class III milk to the pool, but Class IV milk volume was up (Table 2).
At 2.97 billion pounds, Class III pooling was down 4.15 billion pounds from August and represented about 27.8% of the total pool. Both were near low utilization volumes and percentages established in 2020-21, when COVID-19-related government feeding program cheese purchases pushed Class III prices well above Class IV milk prices and provided handler depooling incentives.
In contrast, September 2024 Class IV pooling increased more than 1.57 billion pounds from August, to about 2.53 billion pounds, and represented 23.7% of the total milk pooled. It was the highest volume and percentage since April 2023.
For more background on pooling, depooling and repooling, read FMMO picture clouded by depooling and InFocus: 2021 was another wild ride
Looking ahead
October uniform prices and pooling totals will be announced on Nov. 11-14. Based on FMMO advanced prices and current futures prices, monthly uniform prices have likely peaked, with any increase in the Class I base price offset by lower Class III-IV milk prices.
- Class I base price: Already announced, the October 2024 advanced Class I base price is $23.17 per cwt, up $1.57 from September 2024 and $3.70 more than October 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, October Class I prices will average approximately $25.99 per cwt across all FMMOs, ranging from a high of $28.57 per cwt in the Florida FMMO to a low of $24.97 per cwt in the Upper Midwest FMMO.
- Class I mover formula: The spread in the monthly advanced Class III skim milk pricing factor ($10.30 per cwt) and advanced Class IV skim milk pricing factor ($9.86 per cwt) narrowed for October to 44 cents per cwt. That means that – for the third time in the past four 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 50 cents less 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 the FMMO modernization proposal. The public comment period on the proposal closed on Sept. 13.
- Other class prices: October Class II, III and IV milk prices will be announced on Oct. 30. As of trading on Oct. 11, the Chicago Mercantile Exchange (CME) Class III milk futures price closed at $22.53 per cwt for October, which would be down 81 cents from September. The Class IV milk futures price closed at $21.10 per cwt for October, down $1.19 from September.
Scanning fourth-quarter 2024 Class III-IV milk futures, the price spread shrinks, limiting depooling incentives for both milk classes.
Other information
The USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report was released on Oct. 11. Milk production forecasts for both 2024 and 2025 were lowered from last month based on a slower growth rate of milk per cow for the remainder of 2024, which is also expected to carry over into 2025.
The 2024 Class III milk average price is now forecast at $19.05 per cwt; the Class IV price is projected at $20.80 per cwt. The all-milk price forecast is $22.80 per cwt. Looking ahead to 2025, the Class III milk price is forecast at $18.95 per cwt, and the Class IV price is projected at $20.35 cwt. The 2025 all-milk price is forecast at $22.75 per cwt.
Check the Progressive Dairy website later this month for dairy outlook, milk production, cull cow marketing, risk management and Dairy Margin Coverage (DMC) program margin updates.
