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How do the Producers Maintain Class III Revenue?

The Upper Midwest Federal Milk Order used 30.5 trillion pounds of Class III milk for cheese in 2023.  This is far above the volume of any other Federal Order.  The Upper Midwest is and has been "all about cheese" for a very long time.  There is a lot of press about the current low Class III prices, usually using the Agricultural Marketing Service (AMS) Class III index parameters.  The index is based on 3% milk protein and 3.5% butterfat.  The Upper Midwest Class III milk in March is at 3.31% milk protein and 3.99% butterfat.  It makes a big difference.

Data used below is based on 12-month moving averages to reduce monthly volatility.  The raw data is from the USDA monthly statistics for the Upper Midwest.

Chart I shows the Class III protein revenue by month in the Upper Midwest Federal Order.  With the current low price for protein the contribution to revenue has declined by more than 50% in the last three years.  The reason for the decline is a low price for cheese and a very high price for butterfat.  For an explanation of the impact of high butterfat prices on protein prices, click here.

John Guess

May 12, 2024



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