Were the Producer Milk Prices in 2022 Good or Bad?

The Agricultural Marketing Services (AMS) "Class and Component Prices" for the full year of 2022 are now available.  Were they up? Yes, in the first half of 2022. Were they down?  Yes, in the last half?  What components are achieving high prices?  That's easy, its butter!  

Analyzing the producer milk prices is like peeling off layers of an onion.  After covering milk Class prices in this post, the next post will cover the second layer of the onion.  That is the component prices that make up the milk Class prices.  The third and final post of this set will cover the third layer which is the production and inventories of the commodities that are used to price the components.

While Milk prices were very positive in the first half of 2022, decreases in the last half of 2022 were widespread.  The milk prices posted monthly by the AMS are an index based on component levels of butterfat at 3.5 percent and protein at three percent.  Those numbers are out-of-date but good for annual comparisons.  Butterfat is currently averaging over four percent and protein levels are near 3.25 percent, so producers are achieving revenues well above the posted AMS index values by increasing component levels in their milk. 

LAYER ONE - THE MILK CLASS PRICES

The four Classes of milk show similar patterns in 2022 with highs in the middle of the year and decreases in the last half of the year.  The prices of the different Classes are not based on the same components but they did follow the same rise and fall. 

Table of 2022 Class Values

To further illustrate the movement of prices in 2022, the four charts below show the transitions by month for each milk Class in 2021 and 2022.

The Class I fluid milk base price reached its highest 2022 point in June and July with $25.87 per cwt.  By the end of the year, it had fallen to $22.58 per cwt., a nine percent drop.  The skim Class I price is based on an even price mix of skim Class III milk and skim Class IV milk.  The Class I base prices in 2022 do show a nice increase in each month compared with the prior year.

Class I Milk Prices

The Class II prices show a nice escalation in 2022 over 2021.  Class II milk reached its 2022 high in August at $26.91 per cwt. and fell to $23.11 per  cwt. at the end of the year, a 14 percent drop.  Class II milk is the smallest Class of producer milk and has a small impact on the "Uniform" or average price of all Classes of milk. The good news is that the 2022 prices were higher than 2021 in every month of the year.  

Class II Milk Prices

Class III milk for cheese is the largest category of milk usage.  It also shows a consistent pattern with a 2022 high of $25.21 per cwt. in May and a low of $23.11 per cwt. at the end of 2022, an eight percent loss.  Class III milk pricing is based primarily on the wholesale price of Cheddar cheese which will be covered in the third blog post of this set.  The Class III milk did achieve significantly higher prices in 2022 compared to 2021.

Class III Milk Prices

Class IV prices are based on an entirely different basis than Class III but show a similar pattern of midyear highs and decreases in the last half of 2022.  Class IV milk prices reached $25.83 per cwt in June of 2022 but finished the year at $22.12 per cwt. a 14 percent drop.

Class IV Milk Price

The skim milk prices are shown below for Classes III and IV only. Class I skim is based on Class III and IV skim prices.  The Class II volume is relatively small.  In both Classes III and IV, the price of milk has fallen below 2021 prices at the end of the year.  Without the butterfat, which is high priced, skim milk prices are ending 2022 with prices lower than 2021.  

The Class III skim price is showing deterioration in the last half of the year.  From a high of $14.86 per cwt. in May 2022, the price fell to $9.80 per cwt. by the end of the year , a 34 percent drop.

Class III Skim Milk Price

Skim Class IV milk had a peak value of $14.82 per cwt. in May 2022.  By the end of the year the price had fallen to $11.48 per cwt., a 24 percent drop.  Skim Class IV milk prices are based on the price of Nonfat Dry Milk (NDM) which is primarily an export product. International prices for NDM have fallen in the last half of 2022.

Class IV Skim Milk Price

What is easily seen in the two skim milk charts is that without high priced butterfat, all Classes of milk are closing with 2022 at lower prices than 2021.

The year 2022 achieved highs in all milk Classes in the middle of 2022 based on the surging butterfat prices and strong Class III and IV skim milk prices.  By the end of the year, only butterfat continued to maintain historically high prices.

WHAT'S NEXT?

The next post will cover the pricing of the components that are used to calculate the Class prices.  Those components are butterfat, milk protein, other solids, and nonfat solids. They represent LAYER II of the analysis of the milk prices.

 

The final post will cover butter, cheese, dry whey and NDM.  That analysis will cover production and wholesale inventories of these commodities as the pricing is typically linked to these factors.  They represent LAYER III of peeling the milk pricing onion.