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August 12, 2020

Negative PPDs: Here We Go Again

 |  By: Jim Dickrell

Dairy economists warned that the Producer Price Differential (PPD) for July could be even more negative than June. The Central Federal Milk Market Order confirmed that fear Tuesday.

The Central Order PPD came in at -$8.69. In June, it was -$7.51. July’s Central Order Statistical Uniform Price (blend price) at 3.5% butterfat was $15.85, up $2.32 from June’s blend price. The Upper Midwest Federal Order was announced at -$4.86, and the statistical uniform price was $19.68, up from $17.23 in June.

The July Central Order’s price announcement lays out why the PPD is negative. There was about $140 million in the calculated “handler use value of producer milk,” but it came up $71.6 million short when the component values of protein, butterfat, other solids, somatic cells and producer location adjustments were subtracted.

The other problem was that Class III utilization in July in the Central Order was just 2.14%. July Class I utilization was 45%. In the first five months of 2020, Class III utilization in the Central Order averaged almost 40% while Class I utilization was just 27%.

The one bit of amazing news in the price announcement is that protein is now priced at $5.62/lb. This is a record. Protein prices in 2014, a record milk price year, never approached this level.

Other Federal Orders will be releasing their Statistical Uniform Price calculations this week. To view them, go to the United States Department of Agriculture’s website and click on your order’s individual site.