Approximately 95-98 percent of the change in dairy commodity prices used to update the BFP is from the value of cheese. When cheese prices are rising, as they have been recently, one would expect some of the increase will result in a higher BFP in later months. Conclusions T he analysis above indicates that farmers are not being cheated from rising dairy commodity values. The present computation of class prices and the BFP is resulting in a lag between the time that dairy commodity prices rise and dairy farmers receive this higher value in their milk check. In particular, classified pricing is the culprit.
Farmers receive one price for fluid milk and other prices for milk used for manufacturing purposes.
These classified prices have lags built in as already discussed. One could simply replace the whole federal order system with a market-based multiple component pricing system that only paid farmers for the pounds of butterfat, protein and other solids delivered. This system could theoretically pay farmers weekly based on cash market prices for cheese, butter, nonfat dry milk and buttermilk. These cash prices would determine minimum component values. This system would not have any lags since there would be no need for surveys, class I calculations, blend pricing and pooling, etc.