Benchmark Drops $1.65 By Lee Mielke |

Benchmark Drops $1.65 By Lee Mielke

By Lee Mielke

The February Federal order Class III benchmark milk price was announced by the USDA at $17.78 per hundredweight, down $1.65 from January, $3.13 below February 2022, and the lowest it has been since September 2021.

Friday’s Class III futures settlements had the March price at $17.75; April, $17.53; May, $17.83; and June at $18.33, with a peak of $19.68 in October.

The February Class IV price is $18.86, down $1.15 from January, $5.14 below a year ago, and the lowest Class IV since November 2021.

Dairy farmers know first-hand that profitability is taking a dive. One more confirmation of that is in the Agriculture Department’s latest Ag Prices report. The January milk feed price ratio fell to 1.73, down from 1.84 in December, lowest since August 2022, and compares to 2.16 in January 2022.

The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk would only purchase 1.73 pounds of dairy feed of that blend.
The All Milk Price average fell for the third month in a row, hitting $23.10 per hundredweight, down $1.60 from December, after losing 90 cents the month before, and is $1.10 below January 2021. 

California’s price averaged $23.90 per cwt., down $1.60 from December, and 50 cents below a year ago. Wisconsin’s, at $22, was down $1.30 from December, and $1.40 below a year ago.

The national corn price averaged $6.64 per bushel, up 6 cents from December after jumping 9 cents the month before, and is $1.06 above January 2022.

Soybeans climbed to $14.50 per bushel, up a dime, after jumping 40 cents the previous month, and are $1.60 per bushel above January 2022.

Alfalfa hay averaged $263 per ton, down $6 from December, but is $48 per ton above a year ago.

Looking at the cow side of the ledger; the January cull price for beef and dairy combined averaged $81.70 per cwt., up $4.80 from December, $10.10 above January 2022, and $10.10 above the 2011 base average.

As for the income over feed calculation, dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Mo., says “The drop in feed costs offset the third highest January All-Milk price and dropped the income over feed from the previous month and to the lowest level since October 2021.”

“Income over feed costs in January were above the $8 per hundredweight (cwt.) level needed for steady to increasing milk production for the sixteenth month running,” he said. “Soybeans and alfalfa hay set new all-time record high prices in January and all three commodities were in the top two for January all time. Feed costs were the highest ever for the month of January and the ninth highest all time. The All-Milk price dropped out of the top 20 at the twenty-third highest recorded.” The ratio was below the five-year average for the eighth month running, said Brooks, as the average ratio for January is 2.17.”


America’s dairy cows put plenty of milk in the tank in January, thanks to milder weather and an increase in numbers. The Agriculture Department’s preliminary data shows January output at 19.3 billion pounds, up 1.3% from Jan. 2022. The 24-state total, at 18.5 billion pounds, was up 1.5%.

Revisions lowered the 50-state December total by 30 million pounds to 18.9 billion, up 0.6% from a year ago, instead of the 0.8% increase originally reported.

Cow numbers totaled 9.4 million, up 9,000 head from the December count which was revised 4,000 head lower. The January herd was up 38,000 head from a year ago and the largest since Oct. 2022. The 24-state head count was up 9,000 from December and 51,000 above a year ago, also the largest since Oct. 2022.

Output per cow averaged 2,052 pounds, up 18 pounds or 0.9% from Jan. 2021. The December output per cow was revised 2 pounds lower.

Output for all of 2022 was reported at 226.5 billion pounds, up just under 0.1% from 2021, but up 12.5% from 2013. Cow numbers, at 9.40 million, were down 0.5% from 2021 but 1.9% above those in 2013. Output per cow averaged 24,087 pounds in 2022, up 139 pounds from 2021 or 0.6%, and up 10.4% from 2013.

January output in California totaled 3.5 billion pounds, down 1 million pounds, virtually unchanged from a year ago, with 4,000 fewer cows and a loss of 5 pounds per cow. Wisconsin, at 2.7 billion pounds, was up 44 million or 1.6%, as a milder winter gifted a 40 pound gain per cow, with 3,000 fewer cows milked.

Texas was up 5.2%, thanks to 22,000 more cows and a 35 pound gain per cow. Idaho was up 2.6%, on 12,000 more cows and a 15 pound gain per cow.

Florida again registered the biggest loss, down 11.4%, on 12,000 fewer cows. Michigan was up 2.1%, thanks to a 40 pound gain per cow and 2,000 more cows.

Minnesota was up 1.1% on a 25 pound gain per cow offsetting the loss of 1,000 cows. New Mexico was down 4.1%, with 13,000 fewer cows, though output per cow was up 5 pounds. New York was up 3.5%, thanks to 10,000 more cows in the string, and a 40 pound gain per cow. 

Oregon was down 1.4%, on a loss of 2,000 cows. Output per cow was up 5 pounds. Pennsylvania inched up 0.1% on a 10 pound gain per cow offsetting the loss of 2,000 cows. 

South Dakota scored the biggest gain, up 9.1%, thanks to 17,000 more cows offsetting a 15 pound loss per cow. Washington state was down 1.9% on 7,000 fewer cows however output per cow was up 15 pounds, according to the USDA.

Shelves are fattening up. The USDA’s January Cold Storage report puts Jan.31 butter stocks at 262.7 million pounds, up 46.4 million pounds or 21.4% from December, and 43.3 million pounds or 19.7% more than January 2022.

Butter stocks had trailed year ago levels for 16 consecutive months until December. January is the second month to reverse that.

American cheese stocks fell to 818.8 million pounds, down 6.5 million pounds or 0.8% from December, and 18.8 million or 2.2% below a year ago.

The “other” cheese category crept up to 598.9 million pounds, up 3.3 million pounds or 0.5% from December, and up 15.0 million or 2.6% above a year ago.

The total cheese inventory slipped to 1.441 billion pounds, down 4.1 million pounds or 0.3% from December, and 4.1 million or 0.3% above a year ago.


Exports likely kept cheese inventories in check. That remains to be seen if that will be the case in 2023.

U.S. fluid milk sales continue to flounder, down 3.7% in December and down 2.4% for all of 2022. Some of the blame is put on plant-based beverages, and the dairy industry has been calling on the Food and Drug Administration to stop such products from using dairy terms like “milk” but “identity politics” are alive and well in the dairy industry, and the FDA’s recent draft guidance does not stop such usage.

HighGround Dairy President Eric Meyer, speaking in the March 6 “Dairy Radio Now” broadcast, said the dairy industry seems to have lost the term “milk” and probably should have done more earlier to head that off. He said the FDA directive is a “double-edged sword,” that forces plant-based manufacturers to publish data on nutrition, concluding it is confusing for consumers that nutrition differs under the term milk and “There’s no explanation about use of the term.”

There are some dairy state legislators that are upset over this, according to Meyer, so previous legislation from 2017 that would address this, may be re-introduced, so “The fight remains,” he said, “But the government seems to have allowed for this use of the term milk and that’s almost not up for debate anymore and needs to go through the congressional process to try and get that back.”

Meyer does not believe the dairy industry should give up on trying to turn around fluid milk sales and says certain innovations have returned value back to the farmer. “It may not be a volume play,” he concluded, “But more of a margin play for the consumer of fluid milk versus the others.” I’ll drink to that.

Cash dairy prices saw little reaction to the January Cold Storage data, though the Cheddar blocks jumped 3 cents the following Monday, hitting $1.91 per pound. They closed the first Friday of March at $1.95, up 7 cents on the week, but 20 cents below a year ago when they jumped 20.50 cents.

The Cheddar barrels gained a nickel Monday, hitting $1.59, then headed lower, falling to $1.53 Thursday, March 2, lowest since Nov. 24, 2021, but finished Friday at $1.5750, up 3.50 cents on the week, 39.50 cents below a year ago, and 37.50 cents below the blocks. Sales totaled nine cars of block for the week and 26 for the month of February, down from 27 in January. There were 25 carloads of barrel sold on the week, 20 on Friday, and 127 for the month, up from 89 in January.

Midwest cheese processors tell Dairy Market News demand is steady to strong. Cheddar and Italian cheesemakers say demand is being met and production is busy with ample milk. As has been the case since the early days of the COVID pandemic, plant managers are seeing extra downtime sporadically during the workweek but production remains fairly busy. Barrel producers are finding some balance in inventories. Customer needs are being met and any buildups of cheese are usually alleviated within two weeks of production. Spot milk is widely available at similar prices to previous weeks. Market tones are “more neutral than bullish or bearish,” said DMN, due to the large block-barrel price gap.

Looking west, domestic cheese demand is steady from retail and food service purchasers however some pizza producers report lightened demand and below forecast sales. Contract sales remain at a steady pace finishing second quarter bookings with some sold out inventories through May. Export demand is mixed. Asian demand is strong according to some. Barrel inventories are staying ahead of blocks. Cheese output remains strong to steady with plentiful to ample milk available, according to DMN.

Cash butter gained 2 cents Monday but suffered a 7 cent relapse Wednesday, March 1, and headed lower from there to a Friday finish at $2.3450 per pound, down 8.50 cents on the week, lowest in five weeks, and 34 cents below a year ago. There were six cars sold on the week and 41 for February, up from 30 in January.


Butter plants report that demand tones have yet to shift in either direction, but continue to edge on “the slower side,” said DMN. Buyers are approaching with caution as market prices have slipped. Butter availability has grown in the early months of 2023 and bulk butter interests have slowed. Cream is widely available, and some Midwestern producers are full. Contacts expect a seasonal demand push in the upcoming weeks however, as the spring holidays approach. 

Cream is plentiful in the West and demand for it remains steady to light. Churns are running steady to strong, working through cream volumes. Retail demand is light. Some stakeholders report heavy inventories due to below forecasted retail sales. Export demand has lessened, according to DMN.

Grade A nonfat dry milk was not helped by Tuesday’s Pulse and closed Friday at $1.1775 per pound, down 3.75 cents on the week, lowest CME price since Mar. 29, 2021, and 69.50 cents below a year ago. There were eight sales for the week and 42 for the month, down from 50 in January.

Cash dry whey closed the week at 44.50 cents per pound, down 2 cents on the week and 31.25 cents below a year ago. Sales totaled nine for the week and nine for the month, down from 66 in January.

Lastly, a brief review on milk pricing. In most of the USA, milk prices are determined using complex formulas by the U.S. Agriculture Department but the system has evolved over the years from a simple volume/butterfat basis to the current multiple component pricing, which takes into consideration volume, butterfat, protein, and various other components of the milk, as well as where the milk is to be used.

Presently, there are four Classes of milk; Class I is fluid in the bottle or jug and yields the highest rate of return to the farmer. Class II is milk used in ice cream, yogurt, and cream cheese. Class III is milk that goes to cheese and dry whey, and Class IV is milk used in butter, nonfat, and whole milk powder.

It takes 9.6 pounds of milk to produce 1 pound of cheese, so every penny movement in the cheese price is equivalent to about 10 cents on the Class III milk price.

Dry whey is a bi-product from making cheese. One hundred pounds of milk will yield about 10 pounds of cheese and about 6 pounds of dry whey. A 1 cent movement in the dry whey price equals about 5.9 cents on the Class III milk price. 

The Class IV milk price is driven by powder and butter. One hundred pounds of milk yields about 8.6 pounds of nonfat dry milk and 4.2 pounds of butter. A penny movement on the nonfat dry milk price will mean about 8.6 cents on the Class IV milk price and a penny movement on butter results in a 4.2 cent impact on the Class IV price.

Farmers receive a uniform or blend price, which is determined by their region of the country, based upon how much of that farmer’s milk went into the four different classes in his milk market order. 

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