Update highlights

Natzke dave
Dave Natzke
Editor / Progressive Dairy

All-milk, mailbox price spread inched wider in September

It’s water under the bridge, but September 2022 “mailbox” prices averaged about $1 per hundredweight (cwt) less than announced average “all-milk” prices for the same month, based on a preliminary look at two USDA milk price announcements.

  • During September, U.S. all-milk prices averaged $24.40 per cwt, up 10 cents from August 2022.
  • The September 2022 mailbox prices for selected Federal Milk Marketing Orders (FMMOs) averaged $23.40 per cwt, down 14 cents per cwt from August 2022.

The September spread was the widest since March 2022 and above the 2022 year-to-date average of 93 cents per cwt. Several cooperatives announced “market adjustment” deductions to cover rising transportation and labor costs at the end of September.

The September spread between individual states or regions again varied widely, with a difference of about -$2.50 per cwt in Florida and Georgia to -25 cents per cwt in Iowa and Wisconsin.

All-milk prices are reported monthly by the USDA National Ag Statistics Service (NASS). Mailbox prices are reported monthly by the USDA’s Agricultural Marketing Service (AMS) and generally lag all-milk price announcements by a month or more. The price announcements reflect similar – but not exactly the same – geographic areas.

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Impacts of higher processing costs could drive the spread between all-milk and mailbox prices wider in September, as processors implemented “milk market adjustment” check deductions.

The difference in the two announced prices can affect dairy risk management, since indemnity payments under the Dairy Margin Coverage (DMC) are based on the all-milk price, while Dairy Revenue Protection (Dairy-RP) and Livestock Gross Margin for Dairy (LGM-Dairy) programs are based on FMMO class and component prices.

NMPF December Dairy Market Report

Domestic commercial use of milk in all products continued to strengthen, providing some support for prices even as production was increasing, according to National Milk Producers Federation’s Peter Vitaliano. Summarizing dairy markets in the December 2022 Dairy Management Inc./National Milk Producers Federation Dairy Market Report, he said total U.S. dairy exports have exceeded the equivalent of 18% of U.S. milk solids each month since February, keeping the industry on track to surpass last year’s record of 17.3%.

For more information on commercial use, dairy trade, milk production, product inventories, prices and margins, click here.

October fluid sales stay on trend

Here’s an update on U.S. fluid milk sales data from the USDA Agricultural Marketing Service for October 2022.

  • Total sales: Sales of packaged fluid milk products totaled about 3.68 billion pounds, down 2.3% from the same month a year earlier. At 35.81 billion pounds, year-to-date (January-October 2022) sales of all fluid products were down 2.2%.
  • Conventional products: Monthly sales totaled 3.44 billion pounds, down 2.5% from the same month a year earlier. Year-to-date sales totaled 33.43 billion pounds, down 2.3% from January-October 2021.
  • Organic products: Monthly sales totaled 237 million pounds, up 2% from a year earlier. At 2.39 billion pounds, year-to-date sales of all fluid organic products were down 0.9%. Organic represented about 6.4% total fluid product sales in September and 6.7% 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.

GDT index dips again

The latest Global Dairy Trade (GDT) auction, held Jan. 3, brought another decline to the overall dairy product price index. The index fell 2.8%, with prices in all individual product categories lower:

  • Skim milk powder was down 4.3% to $2,838 per metric ton (MT, or about 2,205 pounds).
  • Whole milk powder was down 1.4% to $3,208 per MT.
  • Anhydrous milkfat was down 5.1% to $5,395 per MT.
  • Butter was down 2.8% to $4,479 per MT.
  • Cheddar cheese was down 2.7% to $4,690 per MT.

The GDT platform offers dairy products from six global companies: Fonterra (New Zealand), Dairy America (U.S.), Amul (India), Arla (Denmark), Arla Foods Ingredients (Denmark) and Polish Dairy (Poland). The next GDT auction is Jan. 17.

Ag producer sentiment ends year stronger

Following a two-month decline and a year of weak sentiment, the economic outlook of agricultural producers closed out 2022 on a more positive note, according to results of the monthly Purdue University/CME Group Ag Economy Barometer survey. U.S. farmers were more optimistic about both their current situation and expectations for the future. 

The Ag Economy Barometer provides a monthly snapshot of farmer sentiment regarding the state of the agricultural economy. The survey collects responses from 400 producers whose annual market value of production is equal to or exceeds $500,000. Minimum targets by enterprise are as follows: 53% corn/soybeans, 14% wheat, 3% cotton, 19% beef cattle, 5% dairy and 6% hogs. Latest survey results, released Jan. 3, reflect ag producer outlooks as of Dec. 5-9.

Weighted toward corn and soybean producers, the improvement in current sentiment could be attributed to producers taking time to estimate their farm's 2022 income following the completion of the fall harvest, said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture.

Despite the improvement outlook regarding their financial situations, expectations among producers about short- and long-term farmland values has shifted lower.

Looking to the year ahead, the December survey asked producers to compare their expectations for their farm's financial performance in 2023 to 2022. Producers indicated they expect lower financial performance in 2023 and cited rising costs and narrowing margins as key reasons. 

Concerns about costs continue to be top of mind for producers. Nearly half (47%) of crop producers said they expect farmland cash rental rates in 2023 to rise above the previous year. Other top concerns for 2023 include higher input costs (45% of respondents), rising interest rates (22% of respondents) and lower crop or livestock prices (13% of respondents).