Spot Class III milk prices in the Upper Midwest have pushed to $2.63 per hundredweight (cwt.) over class values. That’s the highest midpoint since February 2019, prior to the COVID-19 pandemic. While that $2.63 figure represented the average, prices ranged from $2.25 to $3 during the third week of August. Just one week earlier, the range pushed to $3.50, and that was the highest spot figure dating back to February 2021, according to data collected by USDA.
These positive values for milk over the Class III market baseline essentially mean that milk supplies are getting somewhat tight. In July, the Class III price was $19.79 per cwt. and the August 2024 Class III futures closed at $20.66 on Friday, August 23. As a result, dairy processing plants are willing to pay premium prices above the prevailing Class III price to secure tanker loads of milk. While these premiums for milk typically occur in the marketplace following the spring and early summer flush of milk, this year’s premiums are taking place a little bit sooner when compared to the five-year average in the Upper Midwest.
Overall, it stands to reason that milk supplies are getting tight as milk production has been down for 13 straight months. Even though component production, largely butterfat and protein, continues to grow, it’s not been enough to meet dairy processors needs, as discussed in a recent webinar with CoBank and Terrain. Strong processor demand has driven the positive $2.63 Spot Class III milk price in the Upper Midwest.
Corey Geiger
Aug. 26, 2024
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