Butterfat is Driving Your Milk Price

Butterfat is Driving Your Milk Price

Butterfat only accounted for 32 percent of the Class III price four years ago. But two years later, in 2015, the shift in milk’s value began. Since 2015, butterfat has contributed to one-half or more of the Class III price.

In January 2000, multiple component pricing became the milk pricing system for about 90 percent of federal order milk production. One of the advantages of multiple component pricing is: It provides clear pricing signals to dairy farmers in regards to the economic value of milk components. From 2000 to 2014, the average annual producer protein price was higher than butterfat every year. In 2013, protein was almost double the price of butterfat, $3.30 per pound to $1.66 per pound. In 2015, the shift started – the butterfat price became higher than protein.

So far this year, the shift from protein to butterfat has accelerated. For the first seven months of 2017, the producer butterfat price has exceeded protein every month. The milk pricing system is signaling dairy farmers: Produce butterfat.

No one can predict with 100 percent accuracy future milk prices. However, all current indications point to the demand for milkfat remaining strong, which means butterfat prices remaining high, relative to previous years. For the foreseeable future, butterfat will continue to drive farmgate milk prices.

Click here to look at many tables that show the shift from protein to butterfat over the last 17 years.

Tags: Milk Prices