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Administrators of the 11 Federal Milk Marketing Orders (FMMOs) reported January 2023 prices and pooling data. Uniform or blend prices were lower, producer price differentials (PPDs) were mixed in a narrow range, the Class I mover formula has less impact on Class I prices, and more Class IV milk returned to the pool. Here’s Progressive Dairy’s monthly review of the numbers to provide some additional transparency on your milk check.

Natzke dave
Editor / Progressive Dairy

Uniform prices, PPDs

Compared with December, January 2023 statistically uniform milk prices were all lower (Table 1). Seven FMMOs saw uniform prices down by $1 per cwt or more from the month before.

The highest uniform price for the month was in Florida 6 at $26.07 per hundredweight (cwt), with the low in the Upper Midwest 30 at $19.68 per cwt.

January baseline PPDs were mixed but little changed across all applicable FMMOs (Table 1), ranging from a high of $2.43 per cwt in the Northeast 1 to a low of 25 cents in the Upper Midwest 30. PPDs have zone differentials, so actual amounts will vary within each FMMO.

Also, individual milk handlers apply premiums and deductions to milk checks differently. Numerous processors began implementing “market adjustment” deductions on milk checks last fall to cover rising processing, transportation and labor costs.

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Class prices for January

Compared to a month earlier, all FMMO milk class prices were lower in January and in most cases the lowest in a year:

  • Class I base price: $22.41 per cwt, down 17 cents from December and an 11-month low, but still $2.70 above January 2022
  • Class I base with zone differentials: $25.23 per cwt across all FMMOs, ranging from a high of $27.81 per cwt in the Florida FMMO 6 to a low of $24.21 per cwt in the Upper Midwest FMMO 30
  • Class I mover formula: The spread in the monthly advanced Class III skim milk pricing factor ($9.54 per cwt) and advanced Class IV skim milk pricing factor ($11.62 per cwt) was $2.08 per cwt, the narrowest since July 2022. 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 $22.70 per cwt, 29 cents more than the actual price determined using the “average-of plus 74 cents” formula.
  • Class II milk price: $21.61 per cwt, down $1.50 from December
  • Class III milk price: $19.43 per cwt, down $1.07
  • Class IV milk price: $20.01 per cwt, down $2.11
  • Class III-IV milk price spread: The January Class IV price was 58 cents more than the month’s Class III milk price, and the narrowest spread since May 2022.

Component values, tests

Leading to the decline in January Class III and IV milk prices, a drop in the value of butterfat offset a gain in the value of protein.

The value of butterfat fell more than 38 cents from December 2022 to about $2.77 per pound, the lowest since December 2021. It’s the first month the value of butterfat dropped below $3 per pound since January 2022.

The value of milk protein rose about 15 cents from December to just over $2.80 per pound, the highest since July 2022.

The value of nonfat solids fell 9 cents to about $1.19 per pound, while the value of other solids dipped 3 cents to 23.4 cents per pound.

Affecting statistical uniform prices “at test,” average butterfat and protein tests in pooled milk were down slightly from December in FMMOs providing preliminary data. With its high average butterfat (4.47%) and protein (3.46%) tests, producers in the Pacific Northwest 124 had the potential to see the at-test price at $24.20 per cwt, more than $4 above the statistically uniform price. In California 51, the at-test average was $23.59 per cwt, $3.09 above the statistically uniform price.

Impact on pooling

Overall milk pooling on all FMMOs in January was up about 772 million pounds from December at 14.13 billion pounds. The USDA releases January milk production estimates on Feb. 22.

January Class I pooling was up 40 million pounds from December, representing about 25.5% of total milk pooled. Class II pooling was up 156 million pounds, representing about 8.6% of the total pooled.

Class III pooling was down 135 million pounds from December at 7.55 billion pounds, representing about 53.4% of the total pool (Table 2).

At about 1.77 billion pounds in January, Class IV pooling across all FMMOs increased almost 710 million pounds from December and represented about 12.5% of the total milk pooled (Table 2). It was the highest Class IV volume and percentage pooled since May 2022.


Looking ahead

February 2023 uniform prices and pooling totals will be announced around March 11-14. The outlook for February prices remains on the decline:

  • Class I base price: Already announced, it’s $20.78 per cwt, down $1.63 from January and 86 cents less than February 2022.
  • Class I base with zone differentials: $23.60 per cwt across all FMMOs, ranging from a high of $26.18 per cwt in the Florida FMMO 6 to a low of $22.58 per cwt in the Upper Midwest FMMO 30
  • Class I mover formula: The spread in the monthly advanced Class III skim milk pricing factor ($10.28 per cwt) and advanced Class IV skim milk pricing factor ($11 per cwt) is 72 cents per cwt, the narrowest gap since June 2022. 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 $20.41 per cwt, 37 cents less than the actual price determined using the average-of plus 74 cents formula. That’s the first time the average of formula yielded a higher Class I base price than the previous higher of formula since June 2022.
  • Other class prices: February Class II, III and IV milk prices will be announced on March 1. Fluctuating futures prices have altered market outlooks, with the potential of impacting pooling into 2023. As of the close of trading on Feb. 14, the February Chicago Mercantile Exchange (CME) Class III milk futures price closed at $17.93 per cwt, down $1.50 from January; the February Class IV milk futures price closed at $19.78 per cwt, down $1.04 from January.
  • Class III-IV milk price spread: Based on those futures prices, the February spread in Class III-IV milk prices will grow to $1.04 per cwt. Beyond that, current futures prices hold fairly steady through April, but Class III-IV price spreads grow to $1.16 in March, $1.24 in April and $1.14 in May. That’s ample incentive for Class IV depooling and hints of a greater negative impact of the average-of Class I mover formula.

As always, markets change, so check back with Progressive Dairy for updates.

WASDE outlook

The USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report, released Feb. 8, reduced the milk production estimate for 2022 and cut the forecast for 2023. Despite that production decline, the USDA also lowered its 2023 milk price forecast.

Read: USDA reduces 2023 milk production, price projections