COVID-19 is impacting the entire economy and marketplace, including the milk market. We’ll be providing weekly updates with milk futures prices and other market updates to help keep you as knowledgeable as possible during this time. View the entire list of weekly updates.
August, September, and October Class III prices have declined considerably over the last couple weeks. However, prices from November 2020 through July 2021 seem to have moderated and are trading similarly to slightly higher compared to what they were one month ago. Class III price over the next three months declined an average of $2.23 per cwt since this time last month to $18.11. However, the following 9 months averages $16.57, eight cents per cwt better than one month ago. The Class III milk futures price averages $16.96 for the next 12 months.
Class IV milk futures have declined across the board compared to one month ago. A lot of surplus milk has been manufactured into more shelf stable, non-fat powder products as a result of decreased demand for dairy from food service. However, butter sales are doing extremely well on the retail side, and it is helping bolster Class IV prices. As a matter of fact, U.S. suppliers are having to import more butterfat to meet domestic demand. Class IV milk futures for the next 12 months averages $14.67 per cwt, 61 cents per cwt less than one month ago. However, the historic spread between Class III and IV is diminishing. The effect of the spread causing downward pressure on the Producer Price Differential (PPD) will end in February 2021 when the spread between Class III and IV becomes $1.46 per cwt, two cents less than $1.48—which is the largest spread that does not contribute to negative PPDs. This does not mean that PPDs will stay negative through February. There are several other factors that go into calculated PPDs. PPDs are expected to become positive again sometime this fall.
Last week, the USDA announced that the application deadline for the Coronavirus Food Assistance Program (CFAP) direct payments would be extended to September 11, 2020. If you have already applied and received the initial 80% payment, the remaining 20% payment will start processing beginning August 17, 2020. Applications received now until the deadline will receive 100% of the payment once the application is approved. The CFAP direct payment is roughly equivalent to $6.20 per cwt of an applicant’s first quarter milk production. This is roughly $6,200 for each 100,000 pounds of first quarter milk production. Dairy farmers can elect to have the direct payment paid to them through their cooperative. Contact Zach Myers at 717-346-0849 or your local Farm Service Agency Office for more information.
