Tjl
USDA Recommends Class
808 YONKERS
Assistant Professor
Ag. Economics
Penn State University
STATE COLLEGE (Centre Co.
The USDA recently announced
a recommended decision to extend
provisions for Class 111-A pricing
for milk used to make nonfat dry
milk to a total of 29 federal orders.
This decision, which does not
affect the other 11 federal orders
which were not part of the original
hearing to implement Class ni-A
pricing, is the result of a hearing
held last October.
Currently, only three orders
have Class 111-A pricing, includ
ing the New England and Middle
Atlantic orders, which went into
effect last November. The new
decision recommends that the
Class 111-A pricing formula be the
same for all orders, using a modi
fied yield factor and the Western
States nonfat dry milk price series
published by the Agricultural
Marketing Service of USDA.
Ths is a slight change for the
two northeastern federal orders
which have used the Central
Slates nonfat dry milk price series
since the inception of Class 111-A
pricing in November, 1992.
According to testimony pre
sented at USDA hearings held on
the subject, this change is needed
because the Class 111 price used in
all federal orders is no longer
related to prices nonfat dry milk
plants can afford to pay.
The Class 111 price is deter
mined by the Minnesota-
Wisconsin Price Series (M-W
price), a survey of mostly cheese
plants in the upper Midwest states.
Proponents of Class 111-A con
tend that competition for milk to
be used for cheese sets the M-W
price, pointing to the fact that no
relationship exists between the
M-W price and wholesale nonfat
dry milk prices.
An additional reason for the
change cited by USDA from the
hearing is that the costs of hand
ling each market’s reserve milk
supplies will be more equitably
shared by all producers in each
market Cheese plants in the 29
affected orders have been at
capacity with no need for addi
Quarterly Comparison Of Dairy Products
STATE COLLEGE (Centre Co.) Four times per year —in January, April, July and
October it’s possible to review the relationship between farm milk prices and dairy product whole
sale and retail prices and tract recent changes.
That relationship can be charted for a comparison of those prices at all three levels (see table below).
Note that for the most recent four quarters (one-year period) for which data is available, U.S. average
Grade A and B milk prices have increased 3.2 and 4.2 percent, respectively, over the same period a year
ago.
The wholesale and retail prices indexes reported (representing actual price levels, relative to the base
period indicated) have also increased, except for wholesale butter prices.
However, these dairy product price increases have been in line with, and in most cases, less that,
changes in farm milk prices.
The bad news is that, at the retail level, both cheese and fluid milk and cream prices increased more
than the index of all food prices, meaning dial these two dairy products lost some ground (being competi
tive) for the consumer’s food dollar.
Quarterly U.S. Average
Dairy Price Data
Grade B milk price ($/cwt) 11.40 10.97 -3.8% 11.32 11.80 +4.2%
Grade A milk price ($/cwt) 13.03 12.36 -5.1% 12.63 13.03 +3.2%
Cheese
Butter
Fluid milk
Price 1m
Cheese
Fluid Milk and Cream
All Food
* 1982 = 100.0
iugui
tional milk, so nonfat dry milk
production is the market of last
resort for excess milk in those
markets.
If incorporated into a final deci
sion and voted on by a referendum
of producers, Class 111-A pricing
will impact blend prices in federal
orders here in the Northeast.
The effect on blend prices of
Class ffl-A pricing since its start
in November, 1992 in Federal
Order 4 (the Middle Atlantic
Marketing Area) appear in the
table provided. The last column
compares the blend price with
what would have been had Class
111-A pricing not been in effect.
Producers in the New England
and Middle Atlantic Marketing
Areas should also note that the
new decision to use the Western
States nonfat dry milk price series
will be a change.
During the period covered by
data presented at the hearing, this
price was lower than the Central
States used since last November.
This change recognizes that the
West Coast produces about 60
percent of U.S. nonfat dry milk,
and use of another price series
could over value milk used in
Class 111-A.
Remember, no change will
occur until a final decision is
announced and a referendum held,
which are not likely to take place
before yearend.
Component Pricing
Decision in F.O.
A final decision was announced
which will change milk pricing in
three Midwest federal orders:
Eastern Ohio-Western Pennsylva
nia (Order 36), Ohio Valley
(Order 33), and Indiana (Order 49)
Marketing Areas.
This decision adopts a plan for
pricing milk on the basis of its
protein, as well as butterfat
content.
This "plan also includes, for the
first time in a federal order, adjust
ments to the protein price based on
the somatic cell count (SCC) of
producer milk.
This change will eliminate the
use of differentials in determining
a producer’s minimum blend. Pro
ducers will be paid for milk based
on the pound of protein and butter-
ROBERT YONKERS
Assistant Professor, Ag Economics
Penn State University
Q 1 92 Q 1 93
jxes*
108.4 107.2 -1.1% 108.9 110.8 +1.7%
63.1 53.9 -14.6% 68.5 56.9 -16.9%
120.0 120.9 +0.8% 122.1 122.7 +0.5%
135.4 135.7 +0.2% 133.6 135.6 +1.5%
126.1 127.5 +1.1% 123.3 127.4 +3.3%
137.6 139.9 +1.7% 136.7 138.5 +1.3%
»• 1982-84 = 100.0
lIIA
Month
November
December
January
February
March
April
May
June
Source: Calculated from data supplied by the Middle Atlantic Marketing Area Market Administrator.
fat shipped, using prices per
pound for these two components.
In addition, producers will
receive a weighted average class
differential per 100 pound of milk
produced, reflecting the use of
milk in Class I and II in the order.
Results of producer voting in
the referendum held in late June
and early July have not yet been
announced. If approved, these
changes should take effect soon.
Dairy Price Relationships
Recent issues of this newsletter
have contained articles about the
relationship between farm milk
prices and dairy product whole
sale and retail prices. Four times
each year (in January, April, July,
and October issues), readers of
this newsletter can track recent
changes in prices at all three levels
(see table below).
Note that for the most recent
four quarters (one year period) for
which data is available, U.S. aver
age Grade A and B milk prices
have increased 3.2 and 4.2 per
cent, respectively, over the same
period a year ago. The wholesale
and retail price indexes reported
(representing actual price levels
relative to-the base period indi
cated) have also increased,
excepted for wholesale butter
prices. However, these dairy pro
duct price increases have been in
line with, and in most cases less
than, changes infarm milk prices.
The bad news is that, at the
retail level, both cheese and fluid
milk and cream prices increased
more than the index of all food
prices, meaning that these two
dairy products lost some ground
relatively good values for the con
sumer’s food dollar.
Change, Most Recent 4 Quarters Change,
92-93 One year ago This year 92-93
' Source; Economic Research Service, USDA.
Pricing
on Blend Prices in Federal Order 4 November 1992 - June 1993.
Class m-A Effect
Minimum Prices 0 3.5% BF
Class in Class IDA
s/cwt
11.92
11.42
10.94
10.78
10.99
12.08
12.42
11.94
For Most Federal Orders
11.08
11.02
11.05
11.33
11.18
11.08
11.13
11.04
Walton Gets
NICE Sch l hr
SOUTHAMPTON (Bucks Co.)
Elizabeth L. Walton of Carlisle
was awarded a scholarship by At
lantic Dairy Cooperative to attend
the 1993 National Institute on Co
operative Education (NICE), July
26-29 in Cincinnati, Ohio.
Elizabeth was among five stu
dents selected to attend the NICE'
program. The students, sons or
daughters of Atlantic members,
were awarded scholarships based
on their participation in the Penn
sylvania Council of Cooperative’s
1993 Summer Institute. The pro
gram, held June 27-30 at Ship
pensburg University, leaches high
school students about cooperative
business in a fun and educational
setting.
Elizabeth, 16, is the daughter of
David and Kathleen Walton. She
is a junior at Carlisle High School,
where she is an Honor Roll stu
dent and a photographer for the
Yearbook staff. She is an eight
year 4-H member, completing
projects in dairy, cooking, sewing,
quilting and computers. She is
president of the county-wide 4-H
Dairy Club, recording secretary of
the 4-H County Council and is a
member of the 4-H State Days
food and nutrition team.
She also is a member of the
Cumberland County Junior Hol
stein Club and was the 1992 Cum
berland County Junior Dairy rep
resentative.
At the Summer Institute, Eliza-
Entries Sought For
‘lce Cream Chum-Off
ROCKSPRING (Centre Co.) —
For a fifth consecutive year, Penn
sylvania'a Dairy Promotion Part
ners will be sponsoring an “Ice
Cream Churn-Off” contest at Penn
State’s Ag Progress Days.
The contest will be held on
Wednesday, August 18. at 1 p.m.,
at the dairy promotion booth at the
comer of Main and West Eighth
Streets on the Ag Progress Days
grounds, at Rockspring, just west
of Statp College, on Route 4S.
Contestants will be creating and
making their own flavors of
homemade ice cream for the con
test. Cash prizes are awarded in
the contest to the entries with the
most original ingredients and the
best flavor and appearance. Points
are awarded for entries that use
many a variety of dairy products
and offer simple preparation tech
niques.
The first eight eligible* entries
will be selected to compete in the
contest for the grand prize of
$3OO. Additional prizes of SISO
and $lOO will be awarded to the
second and third place entries, re
spectively. People attending the
Class IDA Class IHA
Utilization Blend Effect
- - $/cwt - -
- percent -
-0.05
-0.05
+O.Ol
+O.OB
+0.02
-0.18
-0.29
-0.20
Elizabeth Walton
beth was a member of the stage
crew and the wake up/good night
team. She was a session chairper
son and a member of MINICO, a
cooperative operated by the stu
dents during the four-day pro
gram.
The Atlantic scholarship win
ners furthered their cooperative
experience at NICE, which is
sponsored annually by the Nation
al Council of Farmer Coopera
tives. They attended workshops
featuring national cooperative
leaders and motivational speakers.
contest will also be able to sample
the eight recipes to determine their
own winners. Recipe brochures
listing all of the entered recipes
will also be available for distribu
tion.
The contest is jointly sponsored
by Pennsylvania’s Dairy Promo
tion Partners the American
Dairy Association and Dairy
Council, Mid East United Dairy
Industry Association/F.O. 36 Ad
vertising Agency, and the Penn
sylvania Dairy Promotion Pro
gram.
To enter the contest, individuals
must print their name, address,
telephone number, and complete
written copy of their recipe on a
piece of paper and mail it to “Ag
Progress Days. Ice Cream Chum-
Off,” Pennsylvania Dairy Promo
tion Program, 2301 North Cam
eron Street, Harrisburg, PA
17110. Recipes should include all
ingredients, preparation instruc
tions, and the amount of ice cream
made by the recipe.
For more information about the
contest, call the Pennsylvania
Dairy Promotion Program, at
(717) 787-6903.