The historically high price for butter is causing some market tribulations on the cheese pricing front.
“There’s another consequence of high butter prices . . . its impact on Class III prices,” shared Geoff Vanden Heuvel. “There’s a quirk in the Class III formula. For every 25 cents per pound increase in butter prices, the Class III formula price milk used to make cheese climbs 10 cents per hundredweight (cwt.),” continued the director of regulatory and economic affairs for the Milk Producers Council.
“So, if cheese prices are constant, the difference in the Class III price with $3.25 butter will be 40 cents higher than the Class III price with $2.25 butter even though cheese makers are not selling any butter and what they are selling — cheese — has not changed in price.
“The fact of the FMMO (Federal Milk Marketing Order) Class III formula may explain why cheesemakers are unable to pay FMMO Class III prices when butter prices are high and need to ‘reblend,’” continued Vanden Heuvel in commenting on the Hoard’s Dairyman Intel, “The record butterfat price run in done.”