Here is a look at news affecting a dairy producer's bottom line this third week of December 2024.
- Class I base price starts new year weaker
- GDT index drops after three higher sales
- USDEC receives $9.7 million in RAPP funding
- October fluid milk sales up 1.3% from last year
- Vitaliano: U.S. dairy consumption strengthens amid record retail prices for butter and yogurt
- DFA workers in Le Mars join Teamsters
Class I base price starts new year weaker
The Federal Milk Marketing Order (FMMO) advanced Class I base price declined to start the new year. At $20.38 per hundredweight (cwt), the January 2025 advanced Class I base price is down $1.05 from December 2024 and the lowest since June 2024.
Despite the decline, the January 2025 price is still $1.90 per cwt above January 2024. The 2024 average Class I base price was $20.35 per cwt, up $1.15 from a year earlier and the third-highest annual average in the past decade. Previous high annual averages were $23.66 per cwt in 2022 and $23.29 per cwt in 2014.
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, January Class I prices will average approximately $23.20 per cwt across all FMMOs, ranging from a high of $25.78 per cwt in the Florida FMMO to a low of $22.18 per cwt in the Upper Midwest FMMO. Those prices will be felt in January regional FMMO uniform milk prices, to be announced Feb. 11-14, 2025.
Contributing to the January 2025 Class I base decline, the advanced butterfat pricing factor was about $2.93 per pound, the lowest since August 2023.
The spread in the monthly advanced Class III skim milk pricing factor ($8.54 per cwt) and advanced Class IV skim milk pricing factor ($10.95 per cwt) grew to $2.41 per cwt for January. That means that the current Class I mover formula negatively 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 44 cents more than the actual price determined using the “average-of plus 74 cents” formula.
The change in the formula back to higher-of calculations – along with zone differential adjustments and other changes – is included in the FMMO modernization referendum. Producer ballots must be postmarked by Dec. 31.
Read: FMMO modernization: USDA releases final decision, goes to producer referendum
GDT index drops after three higher sales
The price index of dairy product prices sold on the Global Dairy Trade (GDT) platform is down 2.8% in the auction held Dec. 17. This is after increasing at each of the three previous trading events.
Compared to the previous auction, prices for individual product categories were mostly lower. Lactose was the only increase at a marginal 0.5%. Anhydrous milkfat was down 3.8%, while whole milk powder and skim milk powder were both down 2.9%. Mozzarella was down 1.8%, and butter and cheddar cheese were lower by less than 1% each. Buttermilk powder was not traded.
The GDT platform offers dairy products from several global companies: Fonterra (New Zealand), Darigold, Valley Milk and Dairy America (U.S.), Arla (Denmark), Arla Foods Ingredients (Denmark), BMI (Germany), Kerry Dairy (Ireland) and Solarec (Belgium).
The next GDT auction is Jan. 7.
USDEC receives $9.7 million in RAPP funding
The U.S. Dairy Export Council (USDEC) received $9.7 million in the second round of Regional Agricultural Promotion Program (RAPP) funding from the USDA, adding to the $10 million granted in the first round of multiyear funding issued last May.
The USDA launched RAPP in 2023 to open and develop new export markets for U.S. food producers.
“During a time of limited budgets and increased demands, this additional funding will enable us to expand on the work we’ve started with the first RAPP tranche and will enhance our abilities to strengthen U.S. dairy’s presence in existing and new markets,” said USDEC President and CEO Krysta Harden.
USDEC is using the funds from the first tranche for a variety of programs, from market intelligence and dairy landscape assessments in Africa and Latin America to ingredient training workshops in Central America to new market expansion activities in Taiwan.
The new $9.7 million from the second round will not only create more opportunities for U.S. dairy exports, but it will also ultimately benefit populations around the world. Like the first tranche of RAPP funding, this second wave can be used over a five-year period.
October fluid milk sales up 1.3% from last year
Fluid milk sales for October 2024 are higher than the same month a year earlier. According to data from the USDA Agricultural Marketing Service:
- Total sales: October sales of packaged fluid milk products were estimated at 3.76 billion pounds, up 1.3% from the same month a year earlier. At 35.6 billion pounds, year-to-date sales of all fluid products are up 0.9%.
- Conventional products: Monthly sales totaled 3.5 billion pounds, up 1% from the same month a year earlier. Sales of whole milk and flavored whole milk increased by 3.6% and 1.8%, respectively. Year-to-date 2024 sales were estimated at 33.1 billion pounds, up 0.5% from this time last year.
- Organic products: October sales totaled 256 million pounds, up 5.9% from a year earlier. Flavored whole milk was up 23.7% compared to the same month last year, while flavored fat-reduced milk and fat free (skim) milk were down 33% and 14.4%, respectively. Year-to-date organic fluid milk sales were estimated at 2.5 billion pounds, up 6.8% from this time last year. Organic represented about 6.8% total fluid product sales in October and 7.1% in total sales year to date.
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.
Vitaliano: U.S. dairy consumption strengthens amid record retail prices for butter and yogurt
At 1.3% higher than a year earlier, October fluid milk sales continued to keep past three-month and year-to-date sales growth positive, according to National Milk Producers Federation’s (NMPF) Peter Vitaliano. Summarizing dairy markets in the December 2024 Dairy Management Inc./NMPF Dairy Market Report, he said yogurt and butter also showed particularly strong U.S. consumption gains during August-October, despite both reaching their highest ever retail prices during the period.
October’s Dairy Margin Coverage margin receded 40 cents per cwt from its record level a month earlier to $15.17 per cwt, the second highest level since margin protection became dairy’s basic federal safety net mechanism.
Following 16 consecutive months when U.S. dairy cows were below year-earlier numbers, the USDA reported the national milking cow herd grew by 10,000 cows year over year in October. Together with other factors, this likely indicates a return to expansion mode for U.S. milk production.
Stocks of all cheese dropped almost to pre-pandemic levels at the end of October, likely driven by constrained production growth and robust exports. Cheese price weakness was responsible for dropping the Class III price by almost $3 per cwt in November from a month earlier.
For more information on commercial use, dairy trade, milk production, product inventories, prices and margins, view the December 2024 Dairy Market Report.
DFA workers in Le Mars join Teamsters
Workers at Kemps, a subsidiary of Dairy Farmers of America (DFA), have voted overwhelmingly to join Teamsters Local 554. The 200 production workers, warehouse workers and drivers are responsible for producing milk products and cottage cheese.
In addition to bargaining their first local union agreement, the newest members of Local 554 will be joining more than 1,800 other DFA Teamsters as part of the first-ever national coordinated contract campaign at the dairy cooperative, which is the largest in North America.
“Everyone at this plant is looking forward to jumping right into bargaining so we can get the wages, health care and safety that we deserve,” said Joseph Morris, a member of the Kemps Teamsters organizing committee.
