An Analysis of Milk Pricing in the United States Dairy Industry (original) (raw)

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