The August 18 post covered the pricing trends of the commodities used to price produce milk. The Agricultural Marketing Service (AMS) calculates and publishes data for all Classes of milk. For Class III, the largest Class, the protein value is calculated as an index based on 3.0% and butterfat is based on 3.5% in total milk. The resulting Class prices are quoted in many published articles. The 2024 YTD actual levels of milk protein and butterfat are 3.3% and 4.2%.
The Agricultural Marketing Service (AMS) calculates and publishes data for all Classes of milk. For Class III, the largest Class, the protein value is calculated based on 3.0% and butterfat is based on 3.5%. The resulting Class III prices are quoted in many published articles. The 2024 YTD actual levels of milk protein and butterfat are 3.3% and 4.2%.
The actual percent varies within each Federal Order and each herd. In 2024, the actual milk protein levels have varied from 3.2% to 3.40% within the Federal Orders and butterfat has varied from 3.9% to 4.4%. Herd level data is not available, but the variance would be much wider.
This post will compare the producer revenue based on actual component levels and the AMS index prices used currently (the USDA has proposed changing many of the formulas).
This post will compare the producer revenue based on actual component levels and the current AMS index prices (the USDA has proposed changing many of the formulas).
Chart I plots the AMS values based on the current formulas. Over the last three years, butterfat prices have increased significantly, and milk protein prices have dropped. (See this post for a review of the pricing formulas.) The values in Chart I are based on 3% protein and 3.5% butterfat. The current spread between the value of butterfat and milk protein is a huge $5.21 per cwt. These are indexes and no one is paid by these values. They represent the movement of commodity prices with a constant level of components
Chart II lists the real average butterfat and protein values based on the most recent component levels. The spread between butterfat revenue and milk protein revenue per cwt. is $6.87. Clearly, butterfat alone is keeping producer milk prices at reasonable levels. Butterfat provides nearly 200% more revenue in Class III milk than milk protein. Butterfat is paid in all Classes of milk and all Federal Orders.
The final chart in this post compares the Class III prices based on the AMS index value and the actual producer revenue. The most important number on the chart is the current Class III actual prices based on actual component levels (the blue line). The average actual Class III revenue is currently $22.05 per cwt. The AMS Class III value is $19.87 per cwt.
