Digest highlights

Natzke dave
Dave Natzke
Editor / Progressive Dairy

Here is a brief look at the news affecting dairy producers for the week of May 14-20, 2023.

Dairy co-ops add support to NMPF petition

Several dairy cooperatives and associations have joined in support of a request for a Federal Milk Marketing Order (FMMO) hearing and proposed reforms from the National Milk Producers Federation (NMPF).

The co-ops submitting letters to the USDA’s Agricultural Marketing Service (AMS) included Bongards Cooperative, the Cooperative Milk Producers Association, Ellsworth Cooperative Creamery, FarmFirst Dairy Cooperative, Land O’Lakes Inc., Michigan Milk Producers Association and Southeast Milk Inc. All are NMPF members. Also submitting letters of support were the American Farm Bureau Federation (AFBF), the Indiana Dairy Producers Association, Northeast Dairy Producers Association, Ohio Dairy Producers Association and the Milk Producers Council, a California dairy farmer trade association.

The USDA AMS received the NMPF request on May 2 and has 30 days to either deny, issue an action plan or request additional information for any petitions seeking to amend a current FMMO.

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June 2023 Class I base price drops

June’s FMMO advanced Class I base price reversed course again, declining to the lowest level since November 2021. At $18.01 per hundredweight (cwt), the June 2023 Class I base is down $1.56 from May and $7.86 less than June 2022. 

Class I zone differentials are added to the base price at principle pricing points to determine the actual Class I price in each FMMO. With those additions, June Class I prices will average approximately $20.83 per cwt across all FMMOs, ranging from a high of $21.81 per cwt in the Florida FMMO 6 to a low of $19.81 per cwt in the Upper Midwest FMMO 30.

Analyzing the Class I mover, the spread in the monthly advanced Class III skim milk pricing factor ($7.17 per cwt) and advanced Class IV skim milk pricing factor ($8.78 per cwt) is $1.61 per cwt, the widest spread since January 2023.

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 $18.07 per cwt, 6 cents more than the actual price determined using the “average-of plus 74 cents” formula.

No recess on school milk debate

With the current academic year winding down, there’s no recess in the debate over flavored milk options served in school meal programs. This week, an article in the Wall Street Journal indicated top officials with the USDA are still considering banning chocolate milk from elementary and middle school cafeterias.

The USDA previously proposed maintaining low-fat (1%) flavored milk as an option under updates to school meal nutrition standards. Public comments on the proposal were accepted until May 10. The USDA expects to issue a final rule in time for schools to plan for school year 2024-25.

While low-fat milk remained an option under the proposed rule, the agency said it might limit the accessibility of flavored milk options due to new sugar and sodium limits. A second proposal would limit milk choices in elementary and middle schools (grades K-8) to a variety of unflavored milks only.

The International Dairy Foods Association (IDFA) submitted comments on the USDA proposal, recommending that flavored milk should be an option as part of school meals at all levels.

Earlier this spring, the IDFA established the “Healthy School Milk Commitment,” a pledge by dairy companies to reduce calories and added sugars in flavored milk served in school feeding programs. Beginning with the 2025-26 school year, 37 school milk processors – representing more than 90% of the school milk volume in the U.S. – will cut school milk options to no more than 10 grams of added sugar per 8-fluid-ounce serving. According to the announcement, the standard is consistent with the latest federal Dietary Guidelines for Americans and ahead of current school meal nutrition guidelines established by the USDA.

Read also: WSJ Article Reveals USDA Threat to Ban Flavored Milk in Schools While 90% of Parents with Children in School Oppose the Move

Supreme Court upholds California Proposition 12

In a 5-4 decision, released May 11, the U.S. Supreme Court upheld California’s Proposition 12, a 2018 ballot initiative establishing production confinement standards for pork, veal, eggs and poultry sold in the state, regardless of where it is produced. The ruling affirms a decision by the 9th Circuit Court of Appeals that the rule did not violate the U.S. Constitution’s Commerce Clause.

While not specific to dairy production, agriculture groups warn the ruling could lead to the creation of similar laws in other states, creating additional production requirements and lead to marketing barriers. For example, Massachusetts passed a similar law for which a legal challenge is pending.

“Given the result allowing Prop 12 to stand, it is certainly possible we could see additional states draft their versions of laws aimed at animal production practices,” said Tiffany Dowell Lashmet, associate professor and extension specialist in agricultural law with Texas A&M AgriLife Extension. “For the agricultural industry, this could pose significant concerns about a patchwork of different standards and requirements for each state, which could greatly increase the cost of production.”

Click here to read Dowell Lashmet’s detailed description of the lawsuit and Supreme Court ruling.

GDT index declines

Reflecting global dairy prices, the latest Global Dairy Trade (GDT) price index dipped 0.9% in an auction held May 16, halting a two-session string in which the index rose. Prices in individual product categories were mixed:

  • Skim milk powder (SMP) was down 1.6% at $2,766 per metric ton (MT, or about 2,205 pounds).
  • Whole milk powder was up 0.3% to $3,244 per MT.
  • Anhydrous milkfat was down 4.5% to $4,600 per MT.
  • Butter was up 2.2% to $5,068 per MT.
  • Cheddar cheese was down 3.4% to $4,407 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). U.S.-based Darigold Inc. and Valley Milk LLC will begin offering SMP at the auction in June.

The next GDT auction is June 6.

Coming up

Check the Progressive Dairy website for these updates:

  • The USDA releases a preliminary estimate of April 2023 U.S. milk production on May 19.
  • June 15 is the last day to purchase third-quarter 2023 Dairy Revenue Protection (Dairy-RP) coverage. Also, June 30 signals the end of one federal crop insurance year and the beginning of another. Under USDA rules, producers can cancel a policy, including Dairy-RP and Livestock Gross Margin for Dairy (LGM-Dairy), with one provider and submit application with another insurance provider, effective with the new insurance year. Cancellation during a crop year to submit an application for another policy provider is not allowed. Watch for Progressive Dairy’s June “risk management calendar” coming early next week.

ICYMI (In case you missed it)

  • USDA reduces 2023 milk production outlook, Class III and all-milk prices projected lower: The USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report was released May 12. Compared to the previous month, the USDA reduced the U.S. 2023 milk production estimate slightly, but also cut Class III and all-milk price forecasts. Corn and soybean meal prices are expected to drop; hay inventories started the new crop year lower.
  • April 2023 FMMO uniform prices mostly lower: Uniform or blend prices were mixed in a narrow range compared to March, and producer price differentials (PPDs) were lower, turning negative in some zones. Class IV milk returned to the pool but Class III milk depooling picked up.