By  E. W. Lang

Class IV Milk Futures for February 2022 are $24.04 per cwt.  This was a gain of 55 cents for the week, and in response to butter gaining 21 cents per lb. during the seven day's trade.  Class IV Futures for February through June of 2022 average $23.89 per cwt., a gain of 40 cents since Friday.  For reference, February Class IV was $16.50 in August, an increase of 46 percent.   

Class III Milk, largely a function of cheese values, is less exciting, following block and barrel cheese losing 11 and 14 cents per lb. in the last week of trading in Chicago.  February Class III Futures lost $1.54 per cwt to trade at $20.54 at Friday's close.  Class III milk averages, for the second quarter of 2022, lost 43 cents this week at $21.18 per cwt.

Top end fresh cows are fetching $2300 to $3000 at public auction in Wisconsin, with slaughter cows in the 50 to 60 cent-per-lb. range.  In 2014 when the all-milk price was well into the $20s for a year, fresh cows were $3,000 to $3,400 at auction and slaughter cows were over a dollar.

We like to make a righteous comparison to eight years ago, as if all milk prices were, rightly, into the hi-profit-margin $24 range, but that was a market aberration.  Yes, indeed it could happen again, and we can hope that it will happen, but it was an isolated incident in history. 

We should also realize that today's fresh cows selling over 4x their slaughter value are expensive, or valuable - depending on if you want to buy or sell.    Eight years ago, a $3600 fresh cow with a $1250 slaughter value was still selling for less than 3x her salvage value as beef.

The other thing that producers need to remember is that the selling price of any commodity over time migrates to the average cost to produce that commodity.  There is some warping in milk prices, of course, because of government subsidies.   But in the end, the low-cost milk producer is the one left standing as market forces continue to wring excesses from the industry.

As such, all producers who faithfully and accurately account for all costs, including depreciation and unpaid family labour, need to consider the economically viable option of liquidating.  Fresh and close cows and heifers have outsized value to produce milk right now.  For the last almost eight years, milk cows have absolutely not had this vast, disproportionate value over slaughter, largely owing to the always cruel, ever present, market forces I mentioned earlier.