NEW YORK, NY —On April ic Formula Price (BFP) for milk, 8, 1997, the Coffee, Sugar & the dairy industry’s benchmark for Cocoa Exchange, Inc. (CSCE) milk pricing. Trading in BFP milk will launch a new BFP milk futures will commence with the futures contract based on the Bas- June 1997 futures contract Trad- Dairy Conference (ContiniMd from Page A 1) Referring to himself, Oto continued. “Yesterday, a son of one of the charter members rtf Inter-State served his last day as president of Atlantic Dairy Cooperative. This morning a director of Land o’Lakes welcomes you to this conference. The goals of the former Inter- State woe to bargain with milk dealers for higher prices and to guarantee payment for all member milk. Forming a bargaining cooperative was a big step from that farm gate for many of those farmers.” Like this forma* big step, Oto said the most recent merger of cooperatives was again another big step from, the farm gate. With the theme of “Integrated Dairy Marketing: From Cow to Consumer", various speakers moved the discussion forward. Thomas Gallagher, CEO, Dairy Manage ment. Inc., presented ideas on how DMI is bringing the marketing chain together. He showed figures to prove that commercial dis appearance of dairy products increased after the check-off moneys started rolling in 1983. The check-off program unified, focused, leveraged and integrated dairy marketing and made it accountable. Gallagher gave the definition of integrated marketing as “The process of managing all sources of information about a projecl/servicc to which a consumer prospect or stakeholder is exposed, which behavior moves them tow ard a sale and/or relationship and maintains consumer/stakeholder loyalty." Robert Yonkers, Penn State, said factors that influence the future of the dairy business include external factors such as the federal budget and the economic philosophy of that government Freer trade and a global industry outlook are both part of the business climate of the future. “Dairymen need to think for themselves as business people and operate in a business environment,” Yonkers said. “Some farmers are trying to get government back in the pic ture and others are moving toward more of a marketing orientation.” Yonkers listed cost control, productivity increases, expansion, and the restructure of resources and farm size as ways to make the dairy business more profitable. He said there must be more management specialization and labor specialization by farm enterprise. And capital investments must pay. “You need to focus on planning your busi ness (dairy) around market opportunities instead of trying to change the market to meet your production interests,” Yonkers said. Robert Herrmann. Penn State, said con sumer tastes, preferences and beliefs follows a more fragmented and variable food market ing plan. He listed such factors as differences in income, economic pressures on the middle class, and a growing older population. In the ’2o’s we had the youth revolution; in the ’3o’s the yuppies; in the ’4o’s the exercise craze, and the ’so’s leisure activities became the overriding factor in marketing. Now we ate looking forward to the year 2011 when the first baby boomers turn 65. Today, household size is smaller, and the purchasing power of the average household has not increased much in recent years. But more people are eating out and eating meals prepared away and taken home. But Herrmann believes people in market ing have been over-rating die concerns people have for nutrition. He said the typical ques tions presented in nutrition surveys assumes the respondent is concerned about nutrition. But when you ask the question differently, you get a different appearance of what people think. CSCE To Launch And of course people are hard to understand. The workout/pig out thinking leaves no teal purists in the low fat groups. On Wednesday the program schedule included a presentation about the new basic formula price futures contract that will start to trade next Tuesday. A news release presenting the facts about this new contract accompanies this article. Dairy officials are looking to the trading of this contract as a gage to follow for what future milk prices will be. The futures contract in milk is just another indication that the dairy industry is rapidly chang ing from government support to market support prices. Nearly 200 persons attended this $lOO per ticket, two-day confer ence held in the Sheraton Society Hill Hotel located in the historic district four blocks from the liberty bell. BFP Milk Futures On April ing in BFP milk options will begin on April 15, 1997. The CSCE received Commodity Futures Trading Commission (CFTC) approval of these new markets on February 27, 1997. “The BFP milk futures contract has all the necessary ingredients for success,” said CSCE President James J. Bowe. “This contract is based on a pricing mechanism used by approximately 90% of the United States dairy industry and it solves thc problcms of basis expo sure and physical delivery issues. The Exchange has been working with the dairy industry for years to develop markets that will allow them to manage their risks; this new contract is the answer.” The Exchange’s BFP milk con tract will be cash settled against the BFP for milk, which is announced monthly by the United States Department of Agriculture (USDA). The BFP milk futures contract calls for a contract size of 1,000 times the BFP for milk (equivalent to 100,000 pounds of milk). Trading hours are 9:00 a.m. to 2:00 p.m. New York time and the price quotation is in dollars and cents per hundredweight (cwt). Contract months are Febru ary, April, June, August, October and December, ticker symbol is MJ. “I want to commend the Coffee, Sugar & Cocoa Exchange for working to enhance risk manage ment opportunities for dairy pro ducers and processors,” said CFTC Commissioner David Spears. The CSCE introduced its Erst dairy products in 1993,. with the launch of Cheddar cheese and non fat dry milk futures and options. The Exchange added milk futures and options contracts in 1995 and butter futures and options in 1996. Futures Contract On BFP Milk Calls for the delivery of the val ue of 1,000 times the BFP for milk. The BFP: An estimate, calcu lated and announced by the USDA, of the average price paid for Grade B (manufacturing) milk by plants in Minnesota and Wis consin. Announced around the fifth day of the month following the month to which it applies. Trading Unit: 1,000 times the BFP (100,000 lbs. of milk) Lancaster Farming, Saturday, April 5, IM7-Al9 Trading Hours: 9:00 a.m. to 2:00 p.m. New York time. Delivery Months: Current calendar month, next two months and each February, April, June, August. October, December occurring in the ensuing 12 months. Ticker Symbol: MJ Price Quotation: Dollars and cents per hundredweight (cwL) Minimum Fluctuation: One cent per cwt, equivalent to $lO per contract. Daily Price Limits (from previ ous day’s settlement price): SO cents with variable limits effective under certain conditions. No price limits on two nearby months. Last Trading Day: Exchange business day prior to the day the USDA announces the BFP. Cash Settlement: Final settle ment for each delivery month will be made in cash. The final settle ment for each BFP Milk Futures Contract will be determined by multiplying $lO times the basis point difference between the set tlement price of the previous trad ing day for each contract and the BFP announced for the delivery (Turn to Page A 22)
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