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Administrators of the 11 Federal Milk Marketing Orders (FMMOs) reported April 2023 prices and pooling data. Uniform or blend prices were mixed in a narrow range compared to March, and producer price differentials (PPDs) were lower, in some zones turning negative. Class III milk depooling picked up.

Natzke dave
Editor / Progressive Dairy

Here’s Progressive Dairy’s monthly review of the numbers to provide some additional transparency on your milk check.

Uniform prices, PPDs

Compared with March, April 2023 statistically uniform milk prices were mixed in the 11 FMMOs, increasing in the Upper Midwest and Mideast but slightly lower in all others (Table 1).

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The highest uniform price for the month was in Florida FMMO 6 at $23.28 per hundredweight (cwt), with the low in the Pacific Northwest 124 at $18.38 per cwt.

April baseline PPDs were lower across all applicable FMMOs (Table 1), ranging from a high of $1.25 per cwt in the Northeast FMMO 1 to a low of -14 cents in the Pacific Northwest 124.

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PPDs have zone differentials, so actual amounts will vary within each FMMO, and producers in several other FMMO zones will also see negative PPDs on April milk. Also, individual milk handlers apply premiums and deductions to milk checks differently.

Class prices for April

Compared to a month earlier, three of four FMMO milk class prices were down:

  • Class I base price: $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) was 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.
  • Class II milk price: $19.20 per cwt, down 32 cents from March and $6.51 less than April 2022
  • Class III milk price: $18.52 per cwt, up 42 cents from March but $5.90 less than April 2022
  • Class IV milk price: $17.85 per cwt, down 43 cents from March and $7.36 less than April 2022 – it’s the lowest Class IV price since October 2021.
  • Class III-IV milk price spread: The April 2023 Class III milk price was 57 cents more than the month’s Class IV milk price, bringing Class IV milk back to FMMO pools while providing an incentive for Class III depooling.

Component values, tests

Contributing to the April milk class price calculations, the butterfat value declined while the value of protein was up.

  • The value of butterfat fell to about $2.70 per pound, down 3 cents from March and the lowest since December 2021. It’s the fourth consecutive month the value of butterfat dropped below $3 per pound.
  • The value of milk protein rose about 15 cents from March to about $2.56 per pound.
  • The value of nonfat solids fell 3.8 cents to about 98 cents per pound, while the value of other solids rose 1.4 cents to just under 25 cents per pound.

Affecting statistical uniform prices “at test,” April average butterfat and protein tests in pooled milk were almost all lower from March in FMMOs providing preliminary data. With its high average butterfat (4.2%) and protein (3.36%) tests, producers in the Pacific Northwest 124 had the potential to see the at-test price at $21.24 per cwt, more than $2.86 above the statistically uniform price. In Central FMMO 32, the at-test average was $20.84 per cwt, $2.39 above the statistically uniform price. In California 51, the at-test average was $20.83 per cwt, $2.21 above the statistically uniform price.

Impact on pooling

With one less day of production and a heavier volume of Class III milk depooled, overall milk pooling on all FMMOs in April was down about 1.3 billion pounds from March at 13.6 billion pounds. The USDA releases April milk production estimates on May 19, determining the percent of U.S. milk production pooled through FMMOs.

April Class I pooling was down nearly 360 million pounds from March and at 3.2 billion pounds represented about 23.5% of total milk pooled. Class II pooling was up 50 million pounds, representing about 9.7% of the total pooled.

With the Class III-Class IV spread, April returned more Class IV milk to the pool, while higher-value Class III milk was depooled.

Class III pooling was down more than 2 billion pounds from March at 5.36 billion pounds, representing about 39.5% of the total pool (Table 2). That represented the lowest volume of Class III milk pooled since November 2021 and the lowest percentage of all milk pooled since October 2021.

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At about 3.7 billion pounds in April, Class IV pooling across all FMMOs increased 1.17 billion million pounds from March and represented about 27% of the total milk pooled (Table 2). It was the highest Class IV volume and percentage pooled since May 2021.

Looking ahead

May 2023 uniform prices and pooling totals will be announced around June 11-14. The outlook for May prices is mixed:

  • Class I base price: Already announced, it’s $19.57 per cwt, up 72 cents from April 2023 but $5.88 less than May 2022. 
  • Class I base with zone differentials: $22.39 per cwt across all FMMOs, ranging from a high of $24.97 per cwt in the Florida FMMO 6 to a low of $21.37 per cwt in the Upper Midwest FMMO 30
  • Class I mover formula: The spread in the monthly advanced Class III skim milk pricing factor ($10.37 per cwt) and advanced Class IV skim milk pricing factor ($9.08 per cwt) is $1.29 per cwt, up slightly from April.

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 $19.48 per cwt, 9 cents less 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. Those FMMOs with highest Class I utilization are affected the most.

  • Other class prices: April Class II, III and IV milk prices will be announced on June 1. As of the close of trading on May 12, the May Chicago Mercantile Exchange (CME) Class III milk futures price closed at $16.25 per cwt, down $2.27 from April; the May Class IV milk futures price closed at $18.01 per cwt, up 6 cents from April.
  • Class III-IV milk price spread: Based on current futures prices, depooling incentives flip back to Class IV milk handlers for several months, with large spreads over Class III milk of $1.76 in May and $1.64 in June.

As always, markets change.

WASDE outlook

The USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report, released May 12, reduced the milk production estimate for 2023 but also lowered Class III and all-milk price forecasts for the year.

Read: USDA reduces 2023 milk production outlook, Class III and all-milk prices projected lower