September’s Federal Milk Marketing Order (FMMO) advanced Class I base price will hit a six-month low, while likely escalating producer irritation over the 2019 “Class I mover” formula change.
At $23.62 per hundredweight (cwt), the September 2022 Class I base is down $1.51 from August but still $7.03 above September 2021. The 2022 nine-month average is $23.84 per cwt, up $7.43 from the January-September 2021 average of $16.41 per cwt and continues to be the highest average for that period on record.
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 2022 Class I prices will average approximately $26.44 per cwt across all FMMOs, ranging from a high of $29.02 per cwt in the Florida FMMO 6 to a low of $25.42 per cwt in the Upper Midwest FMMO 30.
Turning attention to the Class I mover, the spread in the monthly advanced Class III skim milk pricing factor ($8.84 per cwt) and advanced Class IV skim milk pricing factor ($13.82 per cwt) is $4.98 per cwt, the widest since July 2020.
Based on Progressive Dairy calculations, the Class I mover calculated under the “higher-of” formula would have resulted in a Class I base price of $25.31 per cwt, $1.69 more than the actual price determined using the “average-of plus 74 cents” formula.
The economic impact on uniform milk prices within individual FMMOs depends on Class I milk utilization in each FMMO.