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Weekly Digest: Summer repeat: July Class IV milk price stays strong, adding to depooling incentives

Progressive Dairy Editor Dave Natzke Published on 04 August 2022

Digest highlights

Summer repeat: July Class IV milk price stays strong, adding to depooling incentives

Don’t look for a big splash of Class IV milk jumping back into Federal Milk Marketing Order (FMMO) pools anytime soon. A wide spread in July Class III-Class IV milk prices provides substantial incentive for it to again stay on the diving board.

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July 2022 FMMO pooling estimates, uniform prices and producer price differentials are scheduled to be released on Aug. 11-14. Check back with Progressive Dairy for an update on Aug. 15.

Based on FMMO milk class prices announced on Aug. 3, the July 2022 Class IV milk price is $3.27 more than the month’s Class III milk price, the widest since November 2020, when the Class III milk price was supported by pandemic food box cheese purchases.

  • At $22.52 per hundredweight (cwt), the July 2022 Class III milk price dropped $1.81 from June but was $6.03 more than July 2021. Through the first seven months of 2022, the Class III milk price averaged $22.89 per cwt, 37 cents more than the January-July average in 2014.

  • At $25.79 per cwt, the July 2022 Class IV milk price declined just 4 cents from June and was $9.79 more than July 2021. The January-July 2022 average stands at $24.83 per cwt, $1.64 more than seven-month average in 2014.

  • At $26.66 per cwt, the July Class II milk price was up 1 cent from June and $9.83 more than June 2021.

Based on current milk futures prices, Class III-IV milk prices could diverge even further in August and remain wide heading into the final quarter of 2022.

As of the close of trading on Aug. 3, the Chicago Mercantile Exchange (CME) Class III milk futures price closed at $20.15 per cwt for August; the Class IV milk futures price closed at $24.99 per cwt. If those prices hold, the August Class III-IV milk price gap will grow to $4.84 per cwt. At $3.91 and $2.22, the gap remains wide in September and October, respectively, extending the Class IV depooling incentive into fall.

  • Butterfat and protein values: Contributing to the strong July Class IV milk price, the value of butterfat rose nearly 3 cents from June to about $3.36 per pound, likely the highest on record. It’s the sixth straight month the butterfat value topped $3 per pound. Prior to 2022, the value of butterfat surpassed $3 per pound only three times in the past nine years, reaching $3.25 per pound in September 2014, $3.18 per pound in November 2015 and $3.01 per pound in August 2017.

In contrast, the value of milk protein dipped more than 50 cents from June to about $2.91 per pound. The value of protein is now down nearly 96 cents per pound since May and the lowest since March.

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The value of nonfat solids fell 1.5 cents to $1.62 per pound in July; the value of other solids decreased about 7 cents to 36 cents per pound.

FarmFirst Dairy Cooperative hosting FMMO webinar, Aug. 11

FarmFirst Dairy Cooperative is hosting a FMMO modernization webinar, Aug. 11, beginning at noon (Central time). The webinar, hosted in conjunction with the National Milk Producers Federation (NMPF), is open to FarmFirst members and other dairy producers.

The webinar will review the process for updating FMMOs and include a presentation on the issues being examined by the NMPF Federal Order Task Force, of which FarmFirst General Manager Jeff Lyon is a member. Discussions will cover make allowances, the Class I mover, milk composition, dairy products and product specifications, and more.

“The dairy industry has evolved significantly since the Federal Milk Marketing Orders were established. While they have proven valuable to dairy producers, they need to evolve as well to keep serving the best interests of dairy producers and to remain relevant in milk price discovery,” said Lyon.

There is no cost to participate in the webinar. Register on the FarmFirst website or here.

Based in Madison, Wisconsin, FarmFirst Dairy Cooperative provides legislative and regulatory advocacy, dairy marketing services, disaster protection, laboratory testing opportunities and industry promotion to farmers in Wisconsin, Minnesota, South Dakota, Michigan, Iowa, Illinois and Indiana.

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AFBF sets FMMO Forum in Kansas City, Oct. 14-16

The American Farm Bureau Federation (AFBF) will host a FMMO Forum, Oct. 14-16, in Kansas City, Missouri.

The forum will consist of four half-day segments, featuring expert panels and roundtable discussions covering: Class I pricing issues, origins and purposes of FMMOs, Class III-IV milk pricing issues and simplifying FMMOs. Discussion topics will include the Class I mover, make allowances, price reporting, milk check standardization and more.

The forum is open to all dairy industry participants. Registration is open until Sept. 22. For more information, visit the forum website.

Podcast covers Edge dairy policy priorities

Edge Dairy Farmer Cooperative detailed a path toward dairy policy and milk pricing reforms in a recent Dairy Stream podcast. The podcast features Mitch Davis of Davis Family Dairies, a member of Edge’s board of directors who served on a multistate task force about milk pricing reform, and Marin Bozic, dairy economist who serves as an adviser to the Edge board.

The episode, “Milk Pricing: Reform starts with farmer-processor relationship,” is available here.

Read also: Edge proposes two-track path toward dairy reforms.

‘Healthy Meals, Healthy Kids Act’ advances out of committee

In late July, the House Education and Labor Committee passed the Healthy Meals, Healthy Kids Act, a bill which reauthorizes federal child nutrition programs and includes provisions regarding access to dairy products.

The bill makes permanent a provision tying milk options (skim and low-fat) consistent with the Dietary Guidelines for Americans (DGA). Amendments to include whole milk and at least one flavored milk option failed to gain approval, however. The Healthy Meals, Healthy Kids Act maintains the requirement that milk substitutes be nutritionally equivalent to real milk, unless the student is being offered a substitute for medical or other diet-related needs. The bill now heads to the House floor.

Hearing planned on Pennsylvania ‘over-order’ premium

The Pennsylvania Milk Marketing Board (PMMB) will hold a hearing, Aug. 30-Sept. 1, to take evidence on “the existence, level and duration” of Pennsylvania’s current over-order premium. On May 27, the Pennsylvania Department of Agriculture (PDA) filed a petition with the PMMB requesting a hearing on the over-order premium and any alternatives.

Southeast Milk selects Dyal as CEO

The board of directors of Southeast Milk Inc. (SMI) unanimously voted to promote Shawn Dyal to chief executive officer. Dyal had been serving as interim CEO since April.

Dyal has worked in dairy for over 20 years across varying aspects of the dairy value chain. He began his career with SMI in 1996 as an employee of one of SMI’s predecessor cooperatives: Tampa Independent Dairy Farmers' Association Inc. He rose to the role of director of supply for SMI. In 2016, he began working for IBA Inc. as a dairy specialist focused on milk quality throughout the Southeast, Texas and New Mexico. In May 2021, Dyal returned to SMI to direct the growing farm supply and service business.

A full-service cooperative, SMI co-op markets nearly 1.8 billion pounds of milk annually on behalf of its nearly 130 members across six Southeast states.

Tillamook announces ‘climate action’ plan

Oregon-based Tillamook County Creamery Association (TCCA) has announced a multifaceted “climate action” plan, including steps to reduce greenhouse gas (GHG) emissions and optimize water use efficiency while improving water quality.

Following dairy industry’s 2050 net zero climate action goals, TCCA has set an interim goal of 30% reduction in Scope 1, 2 and 3 GHG emissions by 2030. In the past year, TCCA has worked collaboratively across all departments to outline more than 25 strategies to help achieve the 2030 target, according to Paul Snyder, TCCA’s executive vice president, stewardship.

The plan involves energy efficiency and renewable energy projects in the company’s facilities; conversion of its fleet of 16 diesel trucks to alternative, low-carbon fuels; and increased use of recycled, reusable or compostable products for packaging and on-farm practices of milk suppliers. On-farm emissions are being addressed through increased adoption of biodigesters, feed and manure additives to reduce methane production and increased application of cover crops and other regenerative practices to reduce GHG emissions while building soil health, enhancing microbial communities and improving water quality.

Snyder said the electricity, steam and fuel used at Tillamook’s processing plants and to power offices and fleet account for only 3% of their total emissions (Scope 1 and 2 emissions). Scope 3 emissions account for the remaining 97%.

More details on TCCA’s carbon footprint and a summary of the climate action plan can be found here.

Borden closing two more Southeast plants

Borden Dairy Inc. will close two more milk processing plants in the Southeast by Sept. 30. The plants in Dothan, Alabama, and Hattiesburg, Mississippi, will affect milk markets for dairy farmers in Georgia, Tennessee, Alabama and Mississippi.

Borden previously announced plans to close plants in Charleston, South Carolina, and Miami, Florida, last May.

Organic Valley adds 51 Northeast farms

Organic Valley announced the addition of 51 dairy farms as organic milk suppliers in the Northeast. The farms are among about 135 small farms in four states (Vermont, New York, Maine and New Hampshire) previously told that their milk supply contracts were terminated by Horizon Organic and Maple Hill Creamery.

Based in LaFarge, Wisconsin, Organic Valley is the largest farmer-owned organic cooperative in the U.S. and one of the world's largest organic consumer brands.

Dairy adds to call for ag workforce reform bill

Trade associations, agribusinesses and cooperatives representing nearly every aspect of agriculture have urged the Senate to take action on the Ag Workforce Reform Bill. Joining the call were more than 45 dairy trade associations and cooperatives.

The 446 groups sent a letter to Senate leadership, calling for action on a bill proponents say reforms agricultural immigration policies to address domestic workforce shortages and strengthens U.S. food security and rural economies.

A copy of the letter can be found here.  end mark

Dave Natzke
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