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December 31, 2018

2018 Federal Order Prices Reflect Bleak Milk Price Landscape

 |  By: Jim Dickrell

While final Class II, III and IV prices have yet to be calculated for December, the range of the Class I mover shows just how bleak 2018 was.


The Class I mover ranged from a low of 13.36/cwt in March to a high of just $16.33 in October. At no time did the Class I mover in 2018 close higher than the December 2017 price of $16.88.


The Class I mover is the base price for fluid milk prices, with differentials then added on top of the mover to determine the fluid milk minimum price for each Federal Order. In the Midwest, for example, a $1.80 differential is commonly added to the Class I mover; in Florida, the differential can be $5.40.


The Class III price ranged from a low of $13.40/cwt in February to a high of $16.09 in September. The Class IV price ranged from $12.87/cwt in February to a high of $15.09 in December. In November, the Class IV actually became the “higher of” Class III and IV, making it the determinant for Class I prices. In November, the Class IV price was 62¢/cwt higher than Class III. In December, Class IV was $1.31 higher than Class III, which came in at $13.78. 


(Note: In the new farm bill, the Class I mover will be changed. Instead of using the "higher of" Class III or IV, Class III and IV will be averaged and then 74¢/cwt will be added to determine the Class I mover. The 74¢ is added to reflect the historical Class I mover if the Class III and IV prices had been averaged.)


In the Midwest, the producer mailbox price peaked at $17.40/cwt in September. USDA’s Agricultural Marketing Service has yet to calculate mailbox prices for October, November or December, but with Class III prices falling, it’s unlikely mailbox prices will top September. In the final quarter of 2017, Midwest mailbox prices averaged $18.48/cwt.