What 2023 Momentum will influence 2024 Dairy Prices?

Producers get paid primarily for their components.  The prices of components, published by the Agricultural Marketing Services (AMS), are really indexes based on standardized levels of components as they were in the year 2000 when the current payment system was established.  Over 24 years, there have been some significant changes in productivity.  See this recent  popular post on 24 years of changes.

• Fluid milk was the main usage of milk in 2000.  It is now cheese.
• The AMS payment program was developed to make sure Class I milk was the highest paid.  Now, with every year Class I fluid milk consumption decreases and cheese consumption increases.
• In 2000, most milk came from small farms.  Small farms are disappearing at an increasing rate.  As an example, Michigan lost over 400 primarily small farms in 2023.

Many articles have been published about 2023 being a tough year for milk producers.  This post will review the trends from 2023 and how they might influence 2024 pricing.

The basic prices for butterfat, milk protein, and nonfat dry milk (NDM) are covered below.  

BUTTERFAT

Over the last three years, butterfat prices have found new record highs. In October 2023 butterfat prices established a new record high of $2.71 per pound.  Prices fell a little in December, but the trend lines are still very positive (Chart I).

The butterfat pricing parameter can be checked off as good news going into 2024.

Chart I - Butterfat Price from 2017 through 2023

Butterfat levels in milk continue to reach new highs, with November at an average of 4.28% (Chart II).  The level of butterfat is not just continuing to grow but is growing at an accelerated rate.  The 4.28% is an average for all the Federal Orders.  The highest levels remain in the Pacific Northwest with a November near record average of 4.58% butterfat.

That is the second parameter to check off as good news going into 2024.

Chart II - Butterfat Levels from 2017 through 2023

PROTEIN

The price of milk protein has been a volatile ride over the last seven years.  During the COVID period prices reached an unbelievable $5.62 per pound in July 2020.  Well, those days are long gone with milk protein prices reaching a near record low of $1.04 per pound in October 2023.   The only time it was slightly lower was in November 2000.  The trend lines look horrible, but will hopefully improve in 2024.  

Regardless, this parameter has to be put in the bad news category going into 2024.

Chart III - Protein price from 2017 to 2023

But there is good news in terms of producers keeping the momentum of protein component levels high and increasing.  The average November Federal Order level of 3.38% protein is a record.  The Pacific Northwest continues to dominate with 3.57% protein.  The trend line is showing accelerating protein levels.

The record protein levels, and the current trends puts this parameter in the good news category.  That makes three out of four in the "good news" category so far.

Chart IV - Protein Levels from 2017 to 2023

NDM

NDM has come to be important in producer milk pricing starring in 2019 and is now used in pricing of skim milk in Classes I, II, and IV.  NDM is an export item with most exports going to Mexico.  Pricing must be competitive with skimmed milk powder in the international markets.  The supply and demand factors are cloudy for this product because it is not produced based on demand, but instead must be sold as a byproduct of butter production.

The current prices have been stable for the last five months with no reason to expect any changes.  Going into 2024 there is no reason to expect any good or bad news.

Chart VI - NDM price from 2017 to 2023

One of the major parameters for success covered in the November post is the 24 year increase in milk per cow.  With more milk, comes more components and revenue.  

Unfortunately, the 24-year long-term trend decreased in 2023. Over the last five months, milk per cow in the U.S. decreased from the prior year.  This decrease is spread through most all the states.

This is clearly a bad news trend as it does not help increase components per cow and does not build producer revenue.

Chart VII - Monthly Milk per Cow from 2018 to 2023

In a sense, there is more good news than bad news going into 2024.  The long-term trend of fewer farms will likely accelerate in 2024 as economics of size continue to be a key factor for survival.  The prior post covering the new Walmart fluid milk plant will also contribute to this decline in smaller farms.

What's the key to survival in 2024?  Components - Component - ComponentsProducers get paid primarily for their components.  The prices of components, published by the Agricultural Marketing Services (AMS), are really indexes based on standardized levels of components as they were in the year 2000 when the current payment system was established.  Over 24 years, there have been some significant changes in productivity.  See this recent  popular post on 24 years of changes.

• Fluid milk was the main usage of milk in 2000.  It is now cheese.
• The AMS payment program was developed to make sure Class I milk was the highest paid.  Now, with every year Class I fluid milk consumption decreases and cheese consumption increases.
• In 2000, most milk came from small farms.  Small farms are disappearing at an increasing rate.  As an example, Michigan lost over 400 primarily small farms in 2023.

Many articles have been published about 2023 being a tough year for milk producers.  This post will review the trends from 2023 and how they might influence 2024 pricing.

The basic prices for butterfat, milk protein, and nonfat dry milk (NDM) are covered below.  

BUTTERFAT

Over the last three years, butterfat prices have found new record highs. In October 2023 butterfat prices established a new record high of $2.71 per pound.  Prices fell a little in December, but the trend lines are still very positive (Chart I).

The butterfat pricing parameter can be checked off as good news going into 2024.

Chart I - Butterfat Price from 2017 through 2023

Butterfat levels in milk continue to reach new highs, with November at an average of 4.28% (Chart II).  The level of butterfat is not just continuing to grow but is growing at an accelerated rate.  The 4.28% is an average for all the Federal Orders.  The highest levels remain in the Pacific Northwest with a November near record average of 4.58% butterfat.

That is the second parameter to check off as good news going into 2024.

Chart II - Butterfat Levels from 2017 through 2023

PROTEIN

The price of milk protein has been a volatile ride over the last seven years.  During the COVID period prices reached an unbelievable $5.62 per pound in July 2020.  Well, those days are long gone with milk protein prices reaching a near record low of $1.04 per pound in October 2023.   The only time it was slightly lower was in November 2000.  The trend lines look horrible, but will hopefully improve in 2024.  

Regardless, this parameter has to be put in the bad news category going into 2024.

Chart III - Protein price from 2017 to 2023

But there is good news in terms of producers keeping the momentum of protein component levels high and increasing.  The average November Federal Order level of 3.38% protein is a record.  The Pacific Northwest continues to dominate with 3.57% protein.  The trend line is showing accelerating protein levels.

The record protein levels, and the current trends puts this parameter in the good news category.  That makes three out of four in the "good news" category so far.

Chart IV - Protein Levels from 2017 to 2023

NDM

NDM has come to be important in producer milk pricing starring in 2019 and is now used in pricing of skim milk in Classes I, II, and IV.  NDM is an export item with most exports going to Mexico.  Pricing must be competitive with skimmed milk powder in the international markets.  The supply and demand factors are cloudy for this product because it is not produced based on demand, but instead must be sold as a byproduct of butter production.

The current prices have been stable for the last five months with no reason to expect any changes.  Going into 2024 there is no reason to expect any good or bad news.

Chart VI - NDM price from 2017 to 2023

One of the major parameters for success covered in the November post is the 24 year increase in milk per cow.  With more milk, comes more components and revenue.  

Unfortunately, the 24-year long-term trend decreased in 2023. Over the last five months, milk per cow in the U.S. decreased from the prior year.  This decrease is spread through most all the states.

This is clearly a bad news trend as it does not help increase components per cow and does not build producer revenue.

Chart VII - Monthly Milk per Cow from 2018 to 2023

In a sense, there is more good news than bad news going into 2024.  The long-term trend of fewer farms will likely accelerate in 2024 as economics of size continue to be a key factor for survival.  The prior post covering the new Walmart fluid milk plant will also contribute to this decline in smaller farms.

What's the key to survival in 2024?  Components - Component - Components

Producers get paid primarily for their components.  The prices of components, published by the Agricultural Marketing Services (AMS), are really indexes based on standardized levels of components as they were in the year 2000 when the current payment system was established.  Over 24 years, there have been some significant changes in productivity.  See this recent  popular post on 24 years of changes.

• Fluid milk was the main usage of milk in 2000.  It is now cheese.
• The AMS payment program was developed to make sure Class I milk was the highest paid.  Now, with every year Class I fluid milk consumption decreases and cheese consumption increases.
• In 2000, most milk came from small farms.  Small farms are disappearing at an increasing rate.  As an example, Michigan lost over 400 primarily small farms in 2023.

Many articles have been published about 2023 being a tough year for milk producers.  This post will review the trends from 2023 and how they might influence 2024 pricing.

The basic prices for butterfat, milk protein, and nonfat dry milk (NDM) are covered below.  

BUTTERFAT

Over the last three years, butterfat prices have found new record highs. In October 2023 butterfat prices established a new record high of $2.71 per pound.  Prices fell a little in December, but the trend lines are still very positive (Chart I).

The butterfat pricing parameter can be checked off as good news going into 2024.

Chart I - Butterfat Price from 2017 through 2023

Butterfat levels in milk continue to reach new highs, with November at an average of 4.28% (Chart II).  The level of butterfat is not just continuing to grow but is growing at an accelerated rate.  The 4.28% is an average for all the Federal Orders.  The highest levels remain in the Pacific Northwest with a November near record average of 4.58% butterfat.

That is the second parameter to check off as good news going into 2024.

Chart II - Butterfat Levels from 2017 through 2023

PROTEIN

The price of milk protein has been a volatile ride over the last seven years.  During the COVID period prices reached an unbelievable $5.62 per pound in July 2020.  Well, those days are long gone with milk protein prices reaching a near record low of $1.04 per pound in October 2023.   The only time it was slightly lower was in November 2000.  The trend lines look horrible, but will hopefully improve in 2024.  

Regardless, this parameter has to be put in the bad news category going into 2024.

Chart III - Protein price from 2017 to 2023

But there is good news in terms of producers keeping the momentum of protein component levels high and increasing.  The average November Federal Order level of 3.38% protein is a record.  The Pacific Northwest continues to dominate with 3.57% protein.  The trend line is showing accelerating protein levels.

The record protein levels, and the current trends puts this parameter in the good news category.  That makes three out of four in the "good news" category so far.

Chart IV - Protein Levels from 2017 to 2023

NDM

NDM has come to be important in producer milk pricing starring in 2019 and is now used in pricing of skim milk in Classes I, II, and IV.  NDM is an export item with most exports going to Mexico.  Pricing must be competitive with skimmed milk powder in the international markets.  The supply and demand factors are cloudy for this product because it is not produced based on demand, but instead must be sold as a byproduct of butter production.

The current prices have been stable for the last five months with no reason to expect any changes.  Going into 2024 there is no reason to expect any good or bad news.

Chart VI - NDM price from 2017 to 2023

One of the major parameters for success covered in the November post is the 24 year increase in milk per cow.  With more milk, comes more components and revenue.  

Unfortunately, the 24-year long-term trend decreased in 2023. Over the last five months, milk per cow in the U.S. decreased from the prior year.  This decrease is spread through most all the states.

This is clearly a bad news trend as it does not help increase components per cow and does not build producer revenue.

Chart VII - Monthly Milk per Cow from 2018 to 2023

In a sense, there is more good news than bad news going into 2024.  The long-term trend of fewer farms will likely accelerate in 2024 as economics of size continue to be a key factor for survival.  The prior post covering the new Walmart fluid milk plant will also contribute to this decline in smaller farms.

What's the key to survival in 2024?  Components - Component - Components

Producers get paid primarily for their components.  The prices of components, published by the Agricultural Marketing Services (AMS), are really indexes based on standardized levels of components as they were in the year 2000 when the current payment system was established.  Over 24 years, there have been some significant changes in productivity.  See this recent  popular post on 24 years of changes.

• Fluid milk was the main usage of milk in 2000.  It is now cheese.
• The AMS payment program was developed to make sure Class I milk was the highest paid.  Now, with every year Class I fluid milk consumption decreases and cheese consumption increases.
• In 2000, most milk came from small farms.  Small farms are disappearing at an increasing rate.  As an example, Michigan lost over 400 primarily small farms in 2023.

Many articles have been published about 2023 being a tough year for milk producers.  This post will review the trends from 2023 and how they might influence 2024 pricing.

The basic prices for butterfat, milk protein, and nonfat dry milk (NDM) are covered below.  

BUTTERFAT

Over the last three years, butterfat prices have found new record highs. In October 2023 butterfat prices established a new record high of $2.71 per pound.  Prices fell a little in December, but the trend lines are still very positive (Chart I).

The butterfat pricing parameter can be checked off as good news going into 2024.

Chart I - Butterfat Price from 2017 through 2023

Butterfat levels in milk continue to reach new highs, with November at an average of 4.28% (Chart II).  The level of butterfat is not just continuing to grow but is growing at an accelerated rate.  The 4.28% is an average for all the Federal Orders.  The highest levels remain in the Pacific Northwest with a November near record average of 4.58% butterfat.

That is the second parameter to check off as good news going into 2024.

Chart II - Butterfat Levels from 2017 through 2023

PROTEIN

The price of milk protein has been a volatile ride over the last seven years.  During the COVID period prices reached an unbelievable $5.62 per pound in July 2020.  Well, those days are long gone with milk protein prices reaching a near record low of $1.04 per pound in October 2023.   The only time it was slightly lower was in November 2000.  The trend lines look horrible but will hopefully improve in 2024.  

Regardless, this parameter has to be put in the bad news category going into 2024.

Chart III - Protein price from 2017 to 2023

But there is good news in terms of producers keeping the momentum of protein component levels high and increasing.  The average November Federal Order level of 3.38% protein is a record.  The Pacific Northwest continues to dominate with 3.57% protein.  The trend line is showing accelerating protein levels.

The record protein levels, and the current trends puts this parameter in the good news category.  That makes three out of four in the "good news" category so far.

Chart IV - Protein Levels from 2017 to 2023

NDM

NDM has come to be important in producer milk pricing starring in 2019 and is now used in pricing of skim milk in Classes I, II, and IV.  NDM is an export item with most exports going to Mexico.  Pricing must be competitive with skimmed milk powder in the international markets.  The supply and demand factors are cloudy for this product because it is not produced based on demand, but instead must be sold as a byproduct of butter production.

The current prices have been stable for the last five months with no reason to expect any changes.  Going into 2024 there is no reason to expect any good or bad news.

Chart VI - NDM price from 2017 to 2023

One of the major parameters for success covered in the November post is the 24 year increase in milk per cow.  With more milk, comes more components and revenue.  

Unfortunately, the 24-year long-term trend decreased in 2023. Over the last five months, milk per cow in the U.S. decreased from the prior year.  This decrease is spread through most all the states.

This is clearly a bad news trend as it does not help increase components per cow and does not build producer revenue.

Chart VII - Monthly Milk per Cow from 2018 to 2023

In a sense, there is more good news than bad news going into 2024.  The long-term trend of fewer farms will likely accelerate in 2024 as economics of size continue to be a key factor for survival.  The prior post covering the new Walmart fluid milk plant will also contribute to this decline in smaller farms.

What's the key to survival in 2024?  Components - Component - Components