November PPDs Take Big Dive
The Producer Price Differential (PPD) in several Federal Milk Marketing Orders took huge drops in November, due to multiple factors.
Skyrocketing dairy commodity prices this fall meant a true price inversion, with Class III higher than Class I and Class IV higher than Class II. That creates upside down pricing, say FFMO economists. And when that happens, money has to be drawn from the lower classes to pay Class I prices.
The other problem is that smaller plants that normally participate in the Federal Orders often choose to depool, which means there are even fewer dollars available to support the Class I price. As a result, the negative PPD gets even more negative.
California reported the largest negative PPD at $3.39/cwt. The Central Order had a PPD of -$3/cwt and the Upper Midwest had a PPD of -.94. Federal Orders in the Northeast and Mideast had not yet reported their PPDs for November as of this writing, but their PPDs usually aren’t as negative because they have higher volumes of milk going to Class I.
The good news is that milk prices are strengthening. This fall, the statistical uniform price was above $17/cwt in the California and Central Orders. In the Upper Midwest, it was above $18 in September and October and topped $19.
You can view all this pricing information by going to your Federal Order site here.