Trade Effects of Dairy Pricing Arrangements (original) (raw)
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An Analysis of Milk Pricing in the United States Dairy Industry
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The Federal Milk Marketing Orders (FMMOs) system of milk pricing Increased attention in dairy industry community, government and academia A dramatic increase in milk price volatility Adverse effects on dairy farm profitability The effects of private Exchange spot cheese market on FMMOs milk pricing National Cheese Exchange (NCE): 1975-1997 Chicago Mercantile Exchange (CME): 1997-present Concerns due to its susceptibility to price manipulations The interaction of Federal milk pricing system and private Exchange spot cheese market Has evolved over the last several decades Has become more complex during the current milk pricing regime The core of the FMMOs classified pricing system is manufacturing milk price Class III milk price (BFP and M-W price) A mover of the overall pricing structure within FMMOs Changed from being based on unregulated manufacturing grade milk price to being calculated using price formulas Cheese price is a major determinant Objective To evaluate increasing interaction between FMMOs milk pricing system and Exchange spot cheese market during three milk pricing regimes
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