It took a roller coaster ride to get there, but December 2021 uniform milk prices in Federal Milk Marketing Orders (FMMOs) reached the highest level in more than seven years. Riding the recent wave in milk class prices, more Class III milk was pooled but more Class IV milk wasn’t.
Natzke dave
Editor / Progressive Dairy

Administrators of the 11 FMMOs (Figure 1) reported December 2021 uniform milk prices, producer price differentials (PPDs) and milk pooling data, Jan. 11-14. Here’s Progressive Dairy’s monthly review of the numbers and their potential impact on your milk check.

Class prices rise

December prices for all individual classes of milk were up from November:

  • The December advanced Class I base price moved to a 12-month high at $19.17 per hundredweight (cwt), up $1.19 from November 2021 but still 70 cents less than December 2020. When adding Class I differentials for each order's principle pricing points, the December Class I price across all FMMOs averaged $21.99, also up $1.19 cents from November.

  • December’s Class II milk price was $19.84 per cwt, up $1.44 from November and the highest since November 2014.

  • The December 2021 Class III price rose 33 cents from November to $18.36 per cwt, the highest since May and up $2.64 per cwt from December 2020, when prices plummeted following a decline in USDA pandemic food box purchases of cheese.

  • The Class IV milk price set another seven-year high at $19.88 per cwt, up $1.09 from November and up $6.52 from December 2020.

December Class III-IV milk prices moved higher due to increases in values of butterfat and milk solids used in monthly milk price calculations. However, the value of protein declined.

At $2.29 per pound, the value of butterfat was up 14 cents from November to $2.29 per pound, the highest since January 2018. After surpassing $3 per pound in October, the value of milk protein slipped another 16 cents from November to $2.59 per pound.


Preliminary data indicated the butterfat content of December milk marketings was the highest of the year in most FMMOs, while average protein tests were down slightly from November peaks. Other solids’ tests were mostly unchanged.

Uniform prices higher

With higher individual milk class prices, December blend or uniform prices at standardized test rose in all FMMOs (Table 1) and were the highest since November 2014. When multiplied by milk class utilization in each FMMO, December uniform prices increased in a range of $0.40-$1.06 per cwt across all 11 FMMOs compared to November. The high uniform price for December was $23.97 per cwt in Florida FMMO #6; only one FMMO, the Upper Midwest #30, had a uniform price under $19 per cwt.


Baseline PPDs positive

December baseline PPDs were positive, up 7-62 cents per cwt compared to November (Table 1) and in many cases the largest positive PPDs in two years or more.

As we remind you each month, PPDs have zone differentials within each FMMO. Also, whether positive or negative, individual milk handlers may apply PPDs to milk checks differently, and deductions may not always be fully transparent.

Impact on pooling

December’s class milk prices created a wide, $1.52-per-cwt gap between Class III-Class IV prices, providing incentives for Class IV depooling from FMMO pools. You can get a general picture of depooling in a couple of ways: on a volume basis, comparing monthly pooling totals to previous months; and on a percentage basis, comparing the percent utilization a specific class of milk relative to all milk pooled that month.

Looking at December, Class IV milk pooled across all FMMOs fell to about 1.23 billion pounds (Table 2), the lowest volume since January-February 2019. December Class IV milk utilization represented less than 10% of total FMMO milk marketings, about one-third of the level seen in the first half of 2021 and the lowest percentage since January-February 2019, when Class IV prices were running $1.50-$2 higher than Class III milk.

FMMO milk utilization

December’s Class III-IV milk relationship again had an opposite impact on Class III pooling. With the Class III milk price weaker than Class IV price, Class III handlers brought more milk back to the pool. On a volume basis, Class III milk pooled in December was estimated at about 6.28 billion pounds, more than four times the average monthly volume pooled during the first five months of 2021 and the most since mid-2019. As a percentage of utilization, Class III milk represented about 50% of the total FMMO pool, also the highest since June 2019.

Looking ahead

With uniform and class prices moving closer to those received in the time-honored year of 2014, prices will be rising near term. The advanced January Class I base price is up 54 cents from December to $19.71 per cwt. Adding Class I differentials, the January Class I price will average $22.53 per cwt. January Class II, III and IV milk prices will be announced on Feb. 2.

At the close of Chicago Mercantile Exchange (CME) trading on Jan. 13, the January Class III futures price slipped to $20.32 per cwt, up $1.96 from December. The January Class IV futures prices settled at $22.80 per cwt, up $2.92 per cwt from December. If those prices hold, the Class III-IV price spread would be $2.48 per cwt, again adding incentives for Class IV depooling.

Longer term, as of Jan. 13, Class III futures prices averaged $21.23 per cwt for all of 2022, with Class IV futures averaging $22.31 per cwt. The spread between the Class III-IV futures prices averages about $1.08 for the year.

While fluctuating, that spread may maintain Class IV depooling incentives. Individual FMMO pooling, depooling and repooling rules play a role in how much. And milk markets change, so the ride continues.

Class I mover

Even though the December Class IV price was substantially higher than the month’s Class III price, the difference between the advanced Class III skim milk pricing factor ($10.73 per cwt) and the advanced Class IV skim milk pricing factor ($12.21 per cwt) is $1.48 per cwt. Based on Progressive Dairy calculations, the Class I mover calculated under either the “average-of plus 74 cents” formula or the “higher-of” would be exactly the same.

The February Class I base price, along with advanced Class III-IV skim milk prices used in the Class I mover, are released on Jan. 20.

Coming up

The next USDA cold storage estimates, covering cheese and butter inventories at the end of December 2021, are released on Jan. 22. The USDA releases December 2021 milk production estimates on Jan. 24. The December Dairy Margin Coverage (DMC) program margin and potential indemnity payments are announced on Jan. 31.  end mark