Here’s an update on economic factors impacting your dairy finances during the first week of November 2023.

Natzke dave
Editor / Progressive Dairy

October FMMO milk class prices diverge

Checks for October milk production will reflect diverging Federal Milk Marketing Order (FMMO) Class III-IV milk prices. Announced on Nov. 1, struggling cheese and protein prices weakened the Class III price, offsetting strong butterfat and Class IV prices and widening the Class III-IV price spread, adding substantial Class IV depooling incentives.

October 2023 FMMO pooling estimates, uniform prices and producer price differentials (PPDs) will be released on Nov. 11-14 and summarized on Nov. 16. Watch Progressive Dairy’s website for an update. Here are factors affecting your milk check:

October class prices are as follows

  • At $21.95 per hundredweight (cwt), the October Class II milk price is up $1.97 from September and the highest since December 2022, but $3.78 less than October 2022.
  • At $16.84 per cwt, the Class III milk price fell $1.55 from September and is the lowest since July. It’s also $4.97 less than October 2022.
  • At $21.49 per cwt, the October 2023 Class IV milk price is up $2.40 from September and is the highest since December 2022 but is $3.47 less than October 2022. Potentially affecting FMMO pooling, the October 2023 Class IV milk price is $4.65 more than the month’s Class III milk price, the widest spread since September 2022.
  • The October 2023 advanced Class I base price was previously announced at a five-month high of $19.47 per cwt, up 57 cents from September but still $3.24 less than October 2022.

Protein, butterfat values diverged

Contributing to the October milk class price calculations, the value of butterfat rose while the value of protein fell substantially. The value of butterfat rose about 59 cents to $3.71 per pound, the third straight month above $3 per pound. The value of milk protein dropped nearly $1.26 from September to about $1.05 per pound, the lowest in several years.

The value of nonfat solids rose slightly to about 98 cents per pound, while the value of other solids increased nearly 3 cents, to 12.4 cents per pound.


Looking ahead to November

Based on FMMO advanced prices and current futures prices, factors impacting overall milk prices for November are mixed.

Already announced, the November 2023 advanced Class I base price is $19.75 per cwt, up 28 cents from October and a 10-month high, but still $4.34 less than November 2022.

As of trading on Nov. 1, the Chicago Mercantile Exchange (CME) Class III milk futures price closed at $17.24 per cwt for November, up 40 cents from October. The Class IV milk futures price closed at $20.75 per cwt for November, down 74 cents from October.

If those prices hold, the November Class III-IV milk price gap remains at more than $3.50 per cwt, maintaining substantial incentives for Class IV depooling.

Federal Reserve leaves interest rates unchanged

Meeting on Oct. 31-Nov. 1, the Federal Reserve Board’s Federal Open Market Committee (FOMC) held interest rates for federal funds steady at 5.5%.

The Federal Reserve meets eight times a year, and it has now left rates unchanged for two meetings in a row. The final meeting for 2023 is scheduled for Dec. 12-13.

November FSA interest rates higher

While Federal Reserve interest rates remained unchanged, interest rates on USDA Farm Service Agency (FSA) agricultural loans moved higher in November 2023. Interest rates for operating and ownership loans (compared to October) are as follows:

  • Farm operating loans (direct): 5.375%, up from 5.25%
  • Farm ownership loans (direct): 5.5%, up from 5.25%
  • Farm ownership loans (direct, joint financing): 3.5%, up from 3.25%
  • Farm ownership loans (down payment): 1.5%, unchanged
  • Emergency Loan (amount of actual loss): 3.75%, unchanged

The FSA also offers guaranteed loans through commercial lenders at rates set by those lenders.

Additionally, the FSA provides low-interest financing to producers to build or upgrade on-farm storage facilities and purchase handling equipment and loans that provide interim financing to help producers meet cash flow needs without having to sell their commodities when market prices are low.  Funds for these loans are provided through the Commodity Credit Corporation (CCC) and are administered by the FSA. All interest rates were up from October:

  • Commodity loans (less than one year disbursed): 6.5%, up from 6.375%
  • Farm storage facility loans:  
    • Three-year loan terms: 4.87%, up from 4.5%
    • Five-year loan terms: 4.75%, up from 4.25%
    • Seven-year loan terms: 4.75%, up from 4.125%
    • 10-year loan terms: 4.75%, up from 4.125%
    • 12-year loan terms: 4.75%, up from 4.125%

For more information producers can contact their local USDA Service Center.

July all-milk, mailbox prices compared

National average July 2023 “mailbox” prices averaged about 79 cents per cwt less than announced “all-milk” prices for the same month:

  • July U.S. all-milk prices averaged $17.40 per cwt, down 50 cents from June 2023. All-milk prices are reported monthly by the USDA National Ag Statistics Service (NASS). The all-milk price is the estimated gross milk price received by dairy producers for all grades and qualities of milk sold to first buyers, before marketing costs and other deductions. The price includes quality, quantity and other premiums, but hauling subsidies are excluded.
  • The July 2023 mailbox prices for selected FMMOs averaged $16.61 per cwt, down 62 cents per cwt from June. The mailbox price is the estimated net price received by producers for milk, including all payments received for milk sold and deducting costs associated with marketing. Mailbox prices are reported monthly by the USDA’s Agricultural Marketing Service (AMS) and generally lag all-milk price announcements by a month or more.

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