This study analyzed component data from herds participating in the Mideast Federal Milk Marketing Order from 2000 through 2002, and its implications for herd profitability. A monthly simulation model was developed to evaluate the economic returns for a representative Holstein and Jersey herd in Pennsylvania under multiple component pricing. Component levels were highly seasonal and variable from farm to farm. A third of the herds during the course of a year realized a 1- to 3-mo temporary reduction in milk fat or protein greater than one standard deviation. Consistently producing milk fat and protein one standard deviation below the mean reduced the Class III value by $0.82/cwt (100 pounds), or 7.09%. The simulation model indicated that a herd of 100 Holstein cows generated $31,221 more income over feed costs (IOFC) a year than a herd of 100 Jersey cows. Although Jersey milk had greater gross value than Holstein milk due to higher component levels, total volume of milk and components produced by Holsteins offset this difference. Simulation results confirm that increasing milk fat and protein percentages by one standard deviation increased IOFC 7.7% for Holsteins and 9.2% for Jerseys relative to the baseline IOFC, with similar losses for component reductions. Increasing milk yield by one standard deviation increased IOFC by 19.6% for Holsteins and 23.9% for Jerseys relative to the baseline IOFC, again with similar losses for reductions in milk production. In all of the scenarios analyzed, the most important factor affecting IOFC was total amount of milk fat and protein produced, not the component percentage levels.

No abstract

The objective of this paper is to analyze the impact of the Northeast Compact on retail fluid milk prices in New England. An econometric model was estimated to simulate the farm‐to‐retail price spread and to analyze the impact of the Northeast Compact on retail milk prices. The results found that retail milk prices rose 30.5 cents per gallon in Boston and 31.4 cents per gallon in Hartford over the Compact period compared with the pre‐Compact period. About 70% of this increase was directly attributable to the Northeast Compact.

The Federal Agricultural Improvement and Reform Act of 1996 required the Secretary of Agriculture to reform federal milk marketing orders. The Secretary carried out this task and issued a final rule on March 31, 1999, that was eventually approved by dairy farmers in a national referendum. However, a temporary restraining order (TRO) was issued on September 28, 1999, that halted the reform process. The TRO was effectively overturned and the reform process restarted when President Bill Clinton signed the Consolidated Appropriations Act of 2000 on November 29, 1999. The final rule as amended consolidates the number of orders, develops a multiple component pricing system that determines new formulas for class prices, and provides a new system for pricing fluid milk based on county-level price differentials. The impact of these changes is to provide more transparency in pricing and improved market signals to farmers. But the new system is also much more vulnerable to changes in dairy commodity prices. The objective of this report is to provide a comprehensive overview of federal order reform and to analyze the impact of recent changes in class price formulas.