Here’s an update on economic factors impacting your milk check as we near the final week of September.

Natzke dave
Editor / Progressive Dairy

October 2023 Class I base price increases

The Federal Milk Marketing Order (FMMO) advanced Class I base price rebounded further in October, reaching a five-month high. At $19.47 per hundredweight (cwt), it is up 57 cents from September but is still $3.24 less than October 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, October Class I prices will average approximately $22.29 per cwt across all FMMOs, ranging from a high of $24.87 per cwt in the Florida FMMO 6 to a low of $21.27 per cwt in the Upper Midwest FMMO 30.

The spread in the monthly advanced Class III skim milk pricing factor ($8.20 per cwt) and advanced Class IV skim milk pricing factor ($8.55 per cwt) is 35 cents per cwt, the narrowest spread since June 2022.

Based on Progressive Dairy calculations, the Class I mover calculated under the “higher-of” formula would also have resulted in a Class I base price of $18.92 per cwt, about 55 cents less than the actual price determined using the “average-of plus 74 cents” formula.


Dairy cull cow marketing maintains strong pace

August U.S. dairy cull cow marketing surged to a five-month high, pushing January-August culling numbers to the highest level since 1986.

Based on latest USDA estimates released Sept. 21, the number of dairy cull cows marketed through U.S. slaughter plants in August 2023 was estimated at 275,500, up 31,300 from July and 9,400 more than August 2022.

August 2022 and 2023 each had 27 non-holiday weekdays and Saturdays. Slaughter averaged 10,200 head per business day this year, up 300 from a year earlier.

The USDA estimated there were 9.39 million dairy cows in U.S. herds in August 2023, unchanged from July and putting the August culling rate at about 2.9% of the herd. Based on the monthly data, year-to-date (January-August dairy cull cow slaughter now stands at 2.139 million head, up 121,900 from the same period a year ago.

Heaviest dairy cow culling during August occurred in the Upper Midwest (Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin) at 67,300 head. That was followed in the Southwest (Arizona, California, Hawaii and Nevada) at 64,100 head.

Other monthly regional totals were estimated at 38,900 head in Delaware, Maryland, Pennsylvania, West Virginia and Virginia; 38,000 head in Arkansas, Louisiana, New Mexico, Oklahoma and Texas; and 31,700 head in Alaska, Idaho, Oregon and Washington.

Primary data for the USDA’s Livestock Slaughter report is obtained from reports from about 900 federally inspected plants and nearly 1,900 state-inspected or custom-exempt slaughter plants.

USDA paying second round of ‘organic’ assistance

The USDA announced a second round of payments for dairy producers through the Organic Dairy Marketing Assistance Program (ODMAP). The move adds $5 million to help organic dairy producers mitigate market volatility, higher input and transportation costs, and unstable feed supply and prices.

The USDA’s Farm Service Agency (FSA) has already paid out $15 million in the first round of payments for eligible producers. The second ODMAP payment is automatic. Participating producers who applied last summer do not need to take any additional action.

The ODMAP provides financial assistance for a producer’s projected marketing costs in 2023, calculated based on a cost share of marketing costs on the pounds of organic milk marketed for the 2022 calendar year (or a projection of 2023 pounds of organic milk marketed if warranted in certain situations), not to exceed 5 million pounds. For ODMAP applicants, the first payment was factored by 75%. The second round of payments will provide the remaining 25% of requested assistance to each eligible applicant.

Fed holds interest rate

Meeting on Sept. 19-20, the Federal Reserve Board’s Federal Open Market Committee (FOMC) voted to maintain the interest rate for federal funds at 5.5%. Two additional meetings are scheduled in 2023: Oct. 31-Nov. 1 and Dec. 12-13.

Read also: Weekly Digest: Ag loan interest rates continue to rise

Coming up

Additional dairy economic reports coming up at Progressive Dairy’s deadline:

  • The USDA will update dairy products cold storage inventories on Sept. 25 and announce the Dairy Margin Coverage (DMC) program margin and indemnity payments for August on Sept. 29.