Calculation of Advanced Pricing Factors

Advanced Pricing Factors are calculated using the weighted average of prices for the two most recent weeks that were released before the 23rd of the preceding month. In the folowing example, the Class III advanced butterfat pricings factor for Dec 2009 is calculated by using the bi-weekly (weighted) average of data released on Nov 07 and Nov 14. The advanced price was released on Nov 20, 2009

NASS Biweekly Average Prices

The advanced prices calculated in the section use biweekly average U.S. NASS survey prices. These biweekly average prices are calculated by a weighted average.

These biweekly average prices are as follows:

AA Butter 1.3532
Cheddar Cheese 1.5113
Dry Whey 0.3452
Nonfat Dry Milk 1.1147

NASS AA Butter Survey

Release Date: Nov 20, 2009


                                  Butter Prices                                 
--------------------------------------------------------------------------------
                    :                        Week Ending                        
       Region       :-----------------------------------------------------------
                    :  Nov 14,  :  Nov 7,   :  Oct 31,  :  Oct 24,  :  Oct 17,  
                    :   2009    :   2009    :   2009    :   2009    :   2009    
--------------------------------------------------------------------------------
                    :                         Dol./Lb.                          
  Avg. Price 1/     :                                                           
    US              :    1.4004      1.3140      1.2950      1.2473      1.2209 
                    :                                                           
                    :                          Pounds                           
  Sales Volume 2/   :                                                           
    US              : 3,131,382   3,766,305   3,484,113   2,655,803   3,937,746 
--------------------------------------------------------------------------------
1/  Prices weighted by volumes reported.                                        
2/  Sales as reported by participating manufacturers

Here we demonstrate how to calculate biweekly weighted average for butter

AA Butter Prices

Two-week weighted average butter price calculation

Week Ending Price Pounds Value
Nov 07 1.4004 3,131,382 4385187.3528
Nov 14 1.3140 3,766,305 4948924.7700

Class III Advanced Butterfat Pricing Factor

(based on Two-week weighted average AA Butter Price)

= (AA Butter Price – 0.1202) * 1.20

= (1.3532 – 0.1202) * 1.20

= 1.2330 * 1.20

= 1.4796

So, the Butterfat Advanced Pricing Factor for Dec 2009 is 1.4796