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Uniform prices lower, small negative PPDs returned in January

Progressive Dairy Editor Dave Natzke Published on 15 February 2021

Market administrator reports show lower blend prices across all Federal Milk Marketing Orders (FMMO) for January milk marketings, with negative producer price differentials (PPDs) returning in the seven orders utilizing multiple component pricing. FMMO monthly PPD and uniform price reports were released the week of Feb. 8.

Uniform prices at standardized test were down from December, with prices below $15 per hundredweight (cwt) in six FMMOs. The December-January price declines ranged from 70 cents in the California FMMO to $3.92 in the Florida FMMO (Table 1).

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FMMO PPDs

After turning mostly positive in December, January PPDs were negative in all applicable FMMOs, although not nearly  as dramatic as those seen during most of the second half of 2020 (Table 1). PPDs have zone differentials, so they’ll vary slightly within each FMMO. In addition, PPD impacts on individual milk checks are based on individual milk handlers.

After a slight drop in December, Class III milk depooling returned to levels seen in most of the latter half of 2020 (Table 2). Total Class III milk pooled across all FMMOs in January 2021 was about 1.5 billion pounds, down from about 2.6 billion in December 2020.

FMMO depooling effect

Across all FMMOs, Class III utilization was about 14% in January, down from about 22% in December and well below the 33% pre-COVID-19 average for January-May 2020. Class III utilization averaged about 41% in 2019.

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The January 2021 Class III milk price was $16.04 per cwt, up 32 cents from December 2020 and above the Class I base price of $15.14 per cwt. The January 2021 Class IV milk price was $13.75 per cwt, up 39 cents. The January Class III-Class IV price gap of $2.29 per cwt was the smallest since May 2020.

Protein was valued at about $3.04 per pound in January, up less than a penny from December.

A look back at the pool

With annual FMMO numbers compiled, total milk pooled on all FMMOs was about 137.8 billion pounds in 2020, down about 12% from 2019. That decline came despite year-to-year U.S. milk production growth of more than 2%, to about 223 billion pounds.

Total milk pooled on FMMOs in 2020 represented about 62% of estimated U.S. milk production during the year. In 2019, nearly 72% of estimated milk production was pooled on FMMOs.

Nearly all of the year-to-year decline in pooled milk volume can be attributed to Class III depooling. At 32.9 billion pounds, the volume of pooled milk used in Class III products was down about 49% from 2019. In comparison:

  • At 43.8 billion pounds, the volume of pooled milk used in Class I products in 2020 was down less than 0.3% from 2019.
  • At 19.6 billion pounds, pooled milk used in Class II products was up more than 9% from 2019.
  • At 41.5 billion pounds, pooled milk used in Class IV products was up 36%.  end mark
Dave Natzke
  • Dave Natzke

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