Understanding Your June Milk Check:
Mideast and Northeast Federal Orders
July 18,2000
Ken Bailey
Penn State University
Dairy farmers marketing their
milk into the Mideast or
Northeast federal order will be
receiving their June milk checks
this week. Even though
farmers receive these final checks
in July, they are based on milk
shipments in June. I will attempt
to explain how these milk checks
were determined.
The first place to look on your
milk check is the component
prices for butterfat, protein, and
other solids. These prices should
be the same as those announced
by the USDA. They are
important since they determine
your own personal
Class 111 value. The
component values per pound for
June 2000 are as follows: protein:
$1.4278, butterfat: $1.4128, and
other solids: $0.0438.
These component values are
determined from economic
formulas that are dependent on
monthly average commodity
prices determined by the National
Agricultural Statistics Service
(NASS). The June monthly
average NASS survey prices per
pound are as follows: butter:
$1.2725, cheese: $1.1137, nonfat
dry milk: $1.0097, and dry whey:
$0.1794.
Next, consider your
component levels for butterfat,
protein, and other solids. These
are computed by dividing the
pounds of the components by the
pounds of milk shipped. It is
important to compare you
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component levels in percentage
terms with the average for the
order you ship your milk into. If
your component levels are below
average, your milk check will be
below average.
Next, look for your Producer
Price Differential, or PPD. The
PPD reflects your share of the
dollars generated by the market
wide pool over and above the
Class 111 value. The PPD is
announced by your Market
Administrator for a major city
(Cleveland for Order 33 and
Boston for Order 1). The PPD on
your milk check is the announced
PPD, plus a location adjustment
to the plant you shipped your milk
to. More about this next.
Mideast Order 33:
The June statistical uniform
price for order 33 was $12.38 per
cwt. This is the average of all
June class sales in the order
adjusted to standard component
levels. By itself, this figure
doesn’t mean much. But
combined with the Class 111 price,
it determines your PPD. Since
the Class 111 price at 3.5 percent
butterfat was $9.46 per cwt, the
PPD for Cleveland was $2.92.
Dairy farmers shipping milk into
order 33 will have this PPD
adjusted to the plant they shipped
their milk to. These adjustments
follow the map of Class I
differentials that Congress agreed
to. For example, dairy farmers
who shipped milk to Sharpsville,
Pennsylvania, will receive a PPD
of $3.02 per cwt in June ($2.92
PPD plus $O.lO adjustment).
The June component averages
for order 33 were butterfat: 3.60
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percent, protein: 2.96 percent,
and other solids: 5.71 percent.
Compare your component levels
on your milk check with these
figures. If your component levels
in percentage terms are below
these averages, your Class 111
value is below average!
Northeast Order 1:
The June statistical uniform
price for order 1 was $13.25 per
cwt. This was based on pool sales
of 42.1 percent Class I, 17.9
percent Class 11, 30.1 percent
Class 111, and 9.9 percent Class
IV. The PPD announced for
Boston was $3.79 per cwt. For
dairy farmers shipping milk to
plants in Lancaster county,
Pennsylvania, the PPD would be
$0.35 per cwt less, or $3.44 per
cwt.
The June component averages
for order 1 were butterfat: 3.63
percent, protein; 2.97 percent,
and other solids: 5.78 percent.
Again, if your component levels
in percentage terms are below
these, your Class 111 value is
below average!
Producers shipping milk into
order 33 also get a premium or
discount for Somatic Cell Count,
or SCC. The premium/discount is
equal to 350 minus your SCC
level (in thousands) times the
somatic cell adjustment rate of
$0.00056 per cwt. If your SCC
level is above 350, you received a
deduction on your milk check.
The average producer in order 33
m June received a SCC premium
of $O.Ol per cwt.
of Morris, PA
FUTURES MARKETS
supply has flowed into cheese
vats and has resulted in growth in
cheese inventories. On the other
hand, milk receipts at cheese
plants is seasonally slowing and
that should result in lower stocks
over time.
Grade AA butter prices at the
CME weakened slightly this
week, falling from $1.19 per
pound on Monday, July 10 to
$1.1775 per pound by Friday,
July 14. It is likely that this price
weakness reflects very short-term
conditions. Butter production has
already declined seasonally due to
two factors. First, butterfat levels
tend to be lower this time of the
year due to summer heat. Second,
starting in late fall, available
cream supplies usually go into ice
cream production.
Butter prices should improve
some during the summer and fall
months. However, adequate
stocks of butter will prevent any
significant run up in prices.
The market right now is
waiting for additional information
before making any new changes
Community Benefit Weekend
CHRISTIANA (Lancaster Co.) Christiana residents are planning a
community benefit weekend July 28-30. The event is to raise funds to
cover medical expenses for Harold Keller, husband, father of three, and
Octorara High School teacher, who was severely injured in an automo
bile accident Sept. 18,1999.
Events include a pig roast dinner on Friday from 5 p.m. - 7 p.m. and a
performance by Soul Patrol, a Saturday auction, and a Sunday morning
worship service and evening gospel concert.
Activities will be held at the Christiana Lions Community building.
For more information or to donate items, call (610) 593-2511.
Finisher Unit.
Lancaster Farming, Saturday, July 22, 2000-A23
(Continued from page Al 6)
m direction. The milk production
report will be released Monday,
July 17. The market will be
looking closely at the number of
cows on 20-select states. If that
number levels off, we could see
cheese prices strengthen slightly.
However, if it continues to
increase, you could see cheese
prices capped at current levels
over the next month.
The second report the market
is anticipating will be the Cold
Storage report to be released
Friday, July 21. That report ill
provide important information on
the amount of cheese and butter
stored m public warehouses. It is
likely that stocks of dairy
products are already seasonally
declining. That, along with a
strong national economy, will
help strengthen dairy commodity
prices and farm-level milk prices.
For more information on dairy
markets, see my website at:
http7Avww.aers.psu.edu/dairyoutl
ook/