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
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