Here’s an update on economic factors impacting your dairy finances as November 2023 comes to a close.
- December 2023 Class I base price steady
- Dairy cull cow marketing slowed in October
- Butter inventory tightens
- October U.S. farm wages up 6%
- Coming up this week
December 2023 Class I base price steady
The Federal Milk Marketing Order (FMMO) advanced Class I base price increased just a penny in December. At $19.76 per hundredweight (cwt), it’s the highest since February but $2.82 less than December 2022. With December’s price, the Class I base averaged $19.20 per cwt in 2023, down $4.46 from 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, December Class I prices will average approximately $22.58 per cwt across all FMMOs, ranging from a high of $25.16 per cwt in the Florida FMMO 6 to a low of $21.56 per cwt in the Upper Midwest FMMO 30.
The spread in the monthly advanced Class III skim milk pricing factor ($5.34 per cwt) and advanced Class IV skim milk pricing factor ($9.08 per cwt) narrowed slightly for December to $3.74 per cwt. It was still the third-widest monthly spread for the year.
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 $20.85 per cwt, about $1.09 more than the actual price determined using the “average-of plus 74 cents” formula.
For the year, the spread in the advanced Class III-IV skim milk factor was $2.15 per cwt. Based on Progressive Dairy calculations, the 2023 Class I mover calculated under the higher-of formula would also have resulted in a Class I base price of $19.44 per cwt, about 24 cents more than the actual price determined using the average-of plus 74 cents formula.
Dairy cull cow marketing slowed in October
A smaller milking herd and improving milk income margins are likely contributing to lower U.S. dairy cull cow marketing this fall. Through early November, the number of dairy cows marketed for beef had trailed year-ago levels for 10 consecutive weeks.
Based on latest USDA data released Nov. 22, the number of dairy cull cows marketed through U.S. slaughter plants in October 2023 was estimated at 243,000, up 2,500 from September but 9,800 fewer than October 2022.
October 2022 and 2023 each had 26 non-holiday weekdays and Saturdays. Slaughter averaged 9,300 head per business day this year, down about 400 from a year earlier.
The USDA estimated there were 9.37 million dairy cows in U.S. herds in October 2023, down 6,000 from the revised September estimate and putting the October culling rate at about 2.6% of the herd. Based on the monthly data, year-to-date January-October dairy cull cow slaughter now stands at 2.621 million head, up 91,700 from the same period a year ago.
Heaviest dairy cow culling during September occurred in the Upper Midwest (Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin) at 64,800 head. That was followed in the Southwest (Arizona, California, Hawaii and Nevada) at 55,500 head.
Other monthly regional totals were estimated at 36,600 head in Delaware, Maryland, Pennsylvania, West Virginia and Virginia; 30,100 head in Arkansas, Louisiana, New Mexico, Oklahoma and Texas; and 27,700 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.
Butter inventory tightens
With pre-holiday sales and lower milk production, butter inventories in cold storage tightened in October. According to the USDA’s monthly Cold Storage report, released Nov. 22:
- Butter stocks were estimated at 238.3 million pounds on Oct. 31, down 11% from September and down 1% more than September 2022.
- Total natural cheese stocks were estimated at about 1.46 billion pounds on Oct. 31, down 1% from September but up 1% compared to October 2022. Stocks of American cheese were estimated at about 838 million pounds, down 2% from the previous month but up 1% from October 2022.
U.S. monthly milk production was below year-ago levels in July-October. The USDA’s November Dairy Products report will be released on Dec. 4.
October U.S. farm wages up 6%
October 2023 U.S. average gross farm wages were up 6% compared to a year earlier, according to the USDA’s latest Farm Labor report. Farm operators paid their hired workers an average of $18.81 per hour during the reference week (Oct. 8-14, 2023). Among individual worker categories:
- Fieldworkers received an average of $18.24 per hour, an increase of 7% compared to a year earlier. Workers in California and Great Lakes states (Michigan, Minnesota and Wisconsin) earned an average of more than $20 per hour.
- Livestock workers earned $17.19 per hour, up 4%. Highest averages were in California, Pacific (Oregon and Washington), Great Lakes and Corn Belt II (Iowa and Missouri) states, topping $19 per hour.
- The field and livestock worker combined wage rate, at $17.95 per hour, was up 6%. Outside of highest averages in California and Pacific states, wages averaged more than $19.25 in in Great Lakes states and about $18.50 per hour in Corn Belt I (Illinois, Indiana and Ohio), Corn Belt II, Northeast (New England and New York) and northern Plains (Kansas, Nebraska, North Dakota and South Dakota) states.
The quarterly USDA survey analyzes workers numbers and wages in January, April, July and October. For state and regional averages, view the full report here.
Read also: House panels says ‘dairy’ needs H-2A program
Coming up this week
The USDA will release its November Ag Prices report on Nov. 30. It will include factors used to calculate the October Dairy Margin Coverage (DMC) program margin and potential indemnity payments. As of Nov. 24, the DMC decision tool forecast a margin of $9.21 per cwt, triggering a small indemnity payment for Tier I dairy producers insured at the top $9.50 per cwt level. Check the Progressive Dairy website for updates.
