Component pricing of milk offers the potential for being a good system, and even a better system, for pricing milk as compared to present procedures. Component pricing offers its greatest immediate promise in pricing manufacturing grade milk and pricing milk used for manufactured dairy products. If we are going to be for or against component pricing, let's first be sure that we are agreed on how we define component pricing. The 132 billion pounds of milk being produced in the U.S. in 1981 will have an average composition per cwt. Milkfat 3.65 lbs.
Milk is tested for fat, and is priced on a cwt.
The skim milk portion of a cwt., 96.35 pounds on the average, is marketed without any adjustment for variations in SNF or protein test of the skim milk. Normally, when we talk about component pricing, we are addressing our- selves to dual component or multiple component pricing. This means that not only the milkfat is tested, and price adjustments are made accord- ingly, but also the protein or the SNF are tested, and appropriate price adjustments are made. Furthermore, processors should be charged more or less, depending on the quantities of solids. The pricing mechanism used by the California Bureau of Milk Stabilization is a classic example of a fully operational dual component pricing plan.