Administrators of the 11 Federal Milk Marketing Orders (FMMOs) reported March 2023 prices and pooling data. Uniform or blend prices and producer price differentials (PPDs) were mostly lower, the “average-of” Class I mover formula provided a small benefit on Class I prices, and more milk returned to FMMO pools.
Here’s Progressive Dairy’s monthly review of the numbers to provide some additional transparency on your milk check.
Uniform prices, PPDs
Compared with February, March 2023 statistically uniform milk prices were lower in 10 of 11 FMMOs, with only the Upper Midwest up slightly (Table 1) thanks to its dominance in Class III utilization. FMMOs with highest Class I utilization saw the largest declines from the month before.
The highest uniform price for the month was in Florida FMMO 6 at $23.51 per hundredweight (cwt), with the low in the Upper Midwest 30 at $18.29 per cwt.
March baseline PPDs were lower across all applicable FMMOs (Table 1), ranging from a high of $1.83 per cwt in the Northeast 1 to a low of 19 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.
Class prices for March
Compared to a month earlier, three of four FMMO milk class prices were lower in March:
- Class I base price: $18.99 per cwt, down $1.79 from February and $3.89 less than March 2022 – through the first quarter of 2023, the Class I base price averaged $20.73 per cwt, 68 cents less than the same period a year ago.
- Class I base with zone differentials: $21.81 per cwt across all FMMOs, ranging from a high of $24.39 per cwt in the Florida FMMO 6 to a low of $20.79 per cwt in the Upper Midwest FMMO 30
- Class I mover formula: The spread in the monthly advanced Class III skim milk pricing factor ($8.49 per cwt) and advanced Class IV skim milk pricing factor ($9.60 per cwt) was $1.11 per cwt, up slightly from February but still the second narrowest 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 $18.80 per cwt, 19 cents less than the actual price determined using the average-of plus 74 cents formula.
- Class II milk price: $19.52 per cwt, down $1.31 from February and $5.24 less than March 2022
- Class III milk price: $18.10 per cwt, up 32 cents from February but $4.35 less than March 2022
- Class IV milk price: $18.38 per cwt, down 48 cents from February and $6.44 less than March 2022
- Class III-IV milk price spread: The March 2023 Class IV milk price was just 28 cents more than the month’s Class III milk price, the narrowest spread since May 2022, reducing incentives for Class IV depooling.
Component values, tests
Contributing to the March milk class price calculations, the values of butterfat and protein were up, but only slightly.
The value of butterfat rose about 1.2 cents from February to $2.73 per pound. It’s the third consecutive month the value of butterfat dropped below $3 per pound.
The value of milk protein rose about 4 cents from February to almost $2.41 per pound.
The value of nonfat solids fell 6 cents to about $1.02 per pound, while the value of other solids rose 2 cents to 23 cents per pound.
Affecting statistical uniform prices “at test,” March average butterfat and protein tests in pooled milk were mixed from February in FMMOs providing preliminary data. With its high average butterfat (4.37%) and protein (3.44%) tests, producers in the Pacific Northwest 124 had the potential to see the at-test price at $21.95 per cwt, more than $3.45 above the statistically uniform price. In California FMMO 51, the at-test average was $21.50 per cwt, $2.71 above the statistically uniform price. In the Central FMMO 32, the at-test average was $21.13 per cwt, $2.65 above the statistically uniform price.
Impact on pooling
With the longer month, overall milk pooling on all FMMOs in March was up about 1.8 billion pounds from February at 14.9 billion pounds. It's the highest monthly volume in nearly four years, dating back to the pre-COVID-19 spring flush of 2019.
The USDA releases March milk production estimates on April 19, determining the percent of U.S. milk production pooled through FMMOs.
March Class I pooling was up nearly 344 million pounds from March and at 3.56 billion pounds represented about 23.9% of total milk pooled. Class II pooling was up 138 million pounds, representing about 8.5% of the total pooled.
Class III pooling was up 593 million pounds from February at 7.53 billion pounds, representing about 50.5% of the total pool (Table 2).
At about 2.55 billion pounds in March, Class IV pooling across all FMMOs increased 709 million million pounds from February and represented about 17% of the total milk pooled (Table 2). It was the highest Class IV volume and percentage since May 2022.
Looking ahead
April 2023 uniform prices and pooling totals will be announced around May 11-14. The outlook for April prices is mixed:
- Class I base price: Already announced, it’s $18.85 per cwt, down 14 cents from March and $5.53 less than April 2022.
- Class I base with zone differentials: $21.67 per cwt across all FMMOs, ranging from a high of $24.25 per cwt in the Florida FMMO 6 to a low of $20.65 per cwt in the Upper Midwest FMMO 30
- Class I mover formula: The spread in the monthly advanced Class III skim milk pricing factor ($8.46 per cwt) and advanced Class IV skim milk pricing factor ($9.37 per cwt) is 91 cents per cwt, down slightly from March. 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 $18.57 per cwt, 27 cents less than the actual price determined using the average-of plus 74 cents formula.
- Other class prices: April Class II, III and IV milk prices will be announced on May 3. As of the close of trading on April 12, the April Chicago Mercantile Exchange (CME) Class III milk futures price closed at $18.66 per cwt, up 56 cents from March; the April Class IV milk futures price closed at $17.88 per cwt, down 50 cents from March.
- Class III-IV milk price spread: Based on those futures prices, the April spread in Class III-IV milk prices will increase to 78 cents per cwt, this time in favor of Class III milk. So in contrast to nearly all of 2022, short-term depooling incentives switch to Class III milk handlers.
As always, markets change.
WASDE outlook
The USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report, released April 11, raised the milk production estimate for 2023 but also increased Class III and all-milk price forecasts for the year.
Read: USDA boosts 2023 milk production outlook, Class III price projected higher
