It was a summer to forget, but milk checks for August production will reflect stronger protein and Class III milk prices and the highest Class IV milk price since January. A narrower price spread between Class III-IV milk prices could bring more Class IV milk to Federal Milk Marketing Order (FMMO) pools.
August class prices
August 2023 FMMO pooling estimates, uniform prices and producer price differentials (PPDs) will be summarized on Sept. 15. (Watch Progressive Dairy’s website for an update.) Three of four milk class prices increased from July, with the most significant jump in the Class III price.
Class prices announced on Aug. 30 were:
- At $19.91 per hundredweight (cwt), the August Class II milk price is up 79 cents from July and the highest since February, but $7 less than August 2022.
- At $17.19 per cwt, the Class III milk price jumped $3.42 from July and is the highest since April. It’s still $2.91 less than August 2022.
- At $18.91 per cwt, the August 2023 Class IV milk price is up 65 cents from July and the highest since January, but is $5.90 less than August 2022.
Potentially affecting FMMO pooling, the August 2023 Class IV milk price is $1.72 more than the month’s Class III milk price. While it’s the narrowest spread since April, it hasn’t eliminated the incentives for Class IV depooling. That’s coming in September milk marketings.
Partially offsetting Class II-III-IV milk price increases for the month, the August 2023 advanced Class I base price was previously announced at $16.62 per cwt, down 70 cents from July and $8.51 less than August 2022. It’s the lowest since September 2021.
Protein, butterfat values improve
Contributing to the August milk class price calculations, the protein value came off a four-year low and the butterfat value increased again.
The value of milk protein jumped nearly 89 cents from July to about $2.09 per pound, the highest since April.
The value of butterfat rose more than 22 cents to $3.02 per pound, the highest (and the first month above $3 per pound) since December 2022.
The value of nonfat solids dipped 1.5 cents, to about 96 cents per pound, while the value of other solids dropped 0.4 cent, to just under 6.5 cents per pound.
Looking ahead
Based on FMMO advanced prices and current futures prices, milk price relationships are changing.
Already announced, the September 2023 advanced Class I base price is $18.90 per cwt, up $2.28 from August but still $4.72 less than September 2022.
As of trading on Aug. 30, the Chicago Mercantile Exchange (CME) Class III milk futures price closed at $18.87 per cwt for September, up $1.68 from August. The Class IV milk futures price closed at $18.48 per cwt for September, down 43 cents from August.
If those prices hold, the September Class III price jumps above the Class IV price for the first time since April, and the Class III-IV milk price gap will dip to 39 cents per cwt, the smallest spread since March, eliminating most incentives for depooling.
