The 2002 Farm Security and Rural Investment Act established a deficiency payment system for milk designed to reimburse dairy producers 45% of the difference between a target price and market prices. This program is known as the Milk Income Loss Contract (MILC) program. The market price used to determine the level of monthly payments made on all classes of milk is the announced Boston Class I price. The target price is set at $16.94, which is equivalent to a Class I mover of $13.69 when the fixed Class I Boston differential of $3.25 is subtracted.2 Under the 2000 Federal Order Reform, the Class I mover is the higher of either the advanced Class III or advanced Class IV prices for the month in question. As shown in Chart 1, advanced prices for Class IV have surpassed those of Class III for most of the period from 2000 to present, with reversals during the last two quarters of 2001 and in isolated subsequent months, most recently August and September 2003. Because the Class I mover generally declined since the inception of the MILC program, monthly MILC payments increased until recent months.