For almost two decades the price for Class I milk – milk used to produce beverage milk products – was based on the better-of the advanced Class III and Class IV skim-milk price. Class III milk is used to produce cheese and Class IV milk is used to produce nonfat-dry-milk powders. Advanced pricing allows fluid-milk processors to know milk-procurement costs as much as six weeks in advance. The better-of element ensured fluid-milk prices were always based on the best-priced manufacturing class of milk.
John Newton
John Newton is the chief economist with American Farm Bureau Federation Market Intel; visit www.fb.org/market-intel for more information.
