Here is a look at news impacting the bottom line of dairy operations in the third week of August 2024.

Natzke dave
Editor / Progressive Dairy
Lee karen
Managing Editor / Progressive Dairy

September 2024 Class I base price inches higher again

The Federal Milk Marketing Order (FMMO) advanced Class I base price continues to inch higher. At $21.60 per hundredweight (cwt), the September 2024 advanced Class I base price is up 28 cents from August 2024 and $2.70 more than September 2023. It’s again the highest Class I base price since January 2023.

Through the first nine months of 2024, the Class I base price now averages $19.67 per cwt, about 62 cents more than the January-September 2023 average of $19.05 per cwt.

Class I zone differentials are added to the base price at principal pricing points to determine the actual Class I price in each FMMO. With those additions, September Class I prices will average approximately $24.42 per cwt across all FMMOs, ranging from a high of $27 per cwt in the Florida FMMO to a low of $23.40 per cwt in the Upper Midwest FMMO. The impact on September FMMO uniform prices will be seen in early October.

The spread in the monthly advanced Class III skim milk pricing factor ($8.10 per cwt) and advanced Class IV skim milk pricing factor ($9.39 per cwt) narrowed for September to $1.29 per cwt. That means that – for the second time in the past three months – the current Class I mover formula positively impacted Class I prices.

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Based on Progressive Dairy calculations, using the Class I mover calculated under the “higher-of” formula would have resulted in a Class I base price about 10 cents less than the actual price determined using the “average-of plus 74 cents” formula.

A change in the formula back to higher-of calculations is included in both the FMMO modernization proposal and in preliminary versions of House and Senate farm bills.

GDT index up 5.5%

The price index of dairy product prices sold on the Global Dairy Trade (GDT) platform took a big upward leap of 5.5% in an auction held Aug. 20.

Compared to the previous auction, prices for individual product categories were mostly higher. Whole milk powder was up 7.2%, with mozzarella and anhydrous milkfat up 5% and 4.8%, respectively. Posting smaller increases were skim milk powder at 4%, butter at 3.7% and lactose at 2.7%. Cheddar cheese was down slightly (0.2%) and buttermilk powder was not traded.

The GDT platform offers dairy products from several global companies: Fonterra (New Zealand), Darigold, Valley Milk and Dairy America (U.S.), Arla (Denmark), Arla Foods Ingredients (Denmark), BMI (Germany), Kerry Dairy (Ireland) and Solarec (Belgium).

The next GDT auction is Sept. 3.

June fluid milk sales 2.9% lower than a year ago

Fluid milk sales for June 2024 are lower than the same month a year earlier, but still slightly higher in year-to-date sales. According to data from the USDA Agricultural Marketing Service:

  • Total sales: June sales of packaged fluid milk products were estimated at 3.2 billion pounds, down 2.9% from the same month a year earlier. At 21.3 billion pounds, year-to-date sales of all fluid products were up 0.6%.
  • Conventional products: Monthly sales totaled 2.96 billion pounds, down 3.4% from the same month a year earlier. Flavored fat-reduced milk sales continue to grow, but only slightly, up 0.4% compared to June 2023. Year-to-date 2024 sales were estimated at 1.67 billion pounds, up 1.1% from this time last year. Both whole milk and flavored whole milk sales, while down compared to June 2023, are up about 1.5% to 2% year to date.
  • Organic products: June sales totaled 234 million pounds, up 4.4% from a year earlier. Flavored whole milk is up nearly 20% again from the same month last year. Year-to-date organic fluid milk sales were estimated at 1.5 billion pounds, up 6% from this time last year. Organic represented about 7.3% total fluid product sales in June and 7% in total sales year to date.

The U.S. figures are based on consumption of fluid milk products in Federal Milk Marketing Order (FMMO) areas, which account for approximately 92% of total U.S. fluid milk sales, and adding the other 8% from outside FMMO-regulated areas. Sales outlets include food stores, convenience stores, warehouse stores/wholesale clubs, nonfood stores, schools, the food service industry and home delivery.

Vitaliano: Milk prices and margins rise despite flat aggregate dairy market demand

Fluid milk, yogurt, butter and non-American-type cheese posted positive annual growth in domestic commercial use during the second quarter this year, according to National Milk Producers Federation’s Peter Vitaliano. Summarizing dairy markets in the August 2024 Dairy Management Inc./National Milk Producers Federation Dairy Market Report, he said significant export growth was posted by all types of cheese and by whey protein concentrate and isolate, with dry whey showing a smaller increase. Overall, however, aggregate domestic use was flat during the period.

U.S. milk production was below year-ago levels during each of the 12 months from July 2023 through June 2024, with an average drop during those months of 0.8% from production during the prior 12 months. Total milk solids production increased by 0.4% and milkfat production was up by 1.7% during this period.

Dairy product and farm-level prices, as well as margins over feed costs, have continued to rise in recent months as supply has kept pace with demand.

For more information on commercial use, dairy trade, milk production, product inventories, prices and margins, view the August 2024 Dairy Market Report.

USDA accepts more than 2.2 million acres in CRP

The USDA is accepting offers for more than 2.2 million acres from agricultural producers and private landowners through this year’s Grassland, General and Continuous Conservation Reserve Program (CRP) sign-ups administered by USDA’s Farm Service Agency (FSA). With these accepted acres, enrollment is very near the 27 million CRP acreage cap.

“The popularity of our suite of Conservation Reserve Programs, including the significant success of Grassland Conservation Reserve Program and the fact that we are nearing the Conservation Reserve Program acreage cap, is a testament to the commitments made by the farmers, ranchers and landowners we serve to mitigate the impacts of climate change by conserving, protecting and enhancing our natural resources,” said Zach Ducheneaux, administrator of USDA’s FSA. “It’s through all FSA’s conservation programs that we are able to work directly with agricultural producers to implement climate smart conservation practices that ultimately benefit everyone.”

Grassland CRP

Including the nearly 1.44 million acres recently accepted in Grassland CRP for offers received in 2024, producers will have enrolled more than 10 million acres in this popular working-lands program.

Grassland CRP allows producers and landowners to continue grazing and haying practices while protecting grasslands and further CRP’s impacts. Grassland CRP leverages working lands practices to improve biodiversity and conserve environmentally sensitive land.     

Top states for this year’s Grassland CRP sign-up include:

  • Nebraska with 237,853 acres accepted
  • Colorado with 218,145 acres accepted
  • New Mexico with 185,619 acres accepted

General and Continuous CRP

The FSA also has accepted nearly 200,000 acres through the General CRP sign-up, bringing total acres enrolled in General CRP to 7.9 million acres. As one of the largest private lands conservation programs in the U.S., CRP offers a range of conservation options to farmers, ranchers and landowners. It has been an especially strong opportunity for farmers with less productive or marginal cropland, helping them reestablish valuable land cover to help improve water quality, prevent soil erosion and support wildlife habitat.

In January 2024, the FSA opened enrollment for Continuous CRP. Under this enrollment, producers and landowners can enroll in CRP throughout the year. Offers are automatically accepted provided the producer and land meet the eligibility requirements and the enrollment levels do not exceed the statutory cap. To date, in 2024, more than 565,000 acres have been offered through Continuous CRP, bringing the total acres enrolled to 8.5 million.

Producers can still make an offer to participate in CRP through the Continuous CRP sign-up, which is ongoing, by contacting FSA at their local USDA Service Center.