Based on the paper developed by:

Milk Market Administrator’s Office

Minneapolis, Minnesota & Lisle, Illinois

The following prices are released by the 23^{rd},

using two week NASS Survey Prices. These prices apply to

the following month.

- Class I Butterfat Price
- Class I Skim Milk Price
- Class I Price at 3.5% Butterfat
- Class II Skim Milk Price

The following Prices are released by the 5^{th} using monthly

average NASS survey prices. These prices apply to the previous month:

- Component Prices
- Class II Butterfat Price
- Class II Price at 3.5% Butterfat
- Class III Prices
- Class IV Prices

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 Sep 2017 is calculated by using the

bi-weekly (weighted) average of data released on Aug 05

and Aug 12. The advanced price was released on Aug 18, 2017

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 | 2.6728 |

Cheddar Cheese | 1.6698 |

Dry Whey | 0.4324 |

Nonfat Dry Milk | 0.8785 |

```
Butter Prices and Sales
08/19/2017 - 09/16/2017
8/19 8/26 9/02 9/09 9/16
Weighted Price
(dollars per pound) 2.6714 2.6280 2.6501 2.5868* 2.5046
Sales
(pounds) 4,468,955 4,125,434 3,610,300 2,325,617* 4,784,861
---------------------------
```

Here we demonstrate how to calculate biweekly weighted average for butter

Week Ending | Price | Pounds | Value |
---|---|---|---|

Aug 05 | 2.6714 | 4,468,955 | 11938366.3870 |

Aug 12 | 2.6280 | 4,125,434 | 10841640.5520 |

= (AA Butter Price – 0.1202) * 1.20

= (2.6728 – 0.1202) * 1.20

= 2.5526 * 1.20

= 3.0631

So, the Butterfat Advanced Pricing Factor for Sep 2017 is 3.0631

Component Prices are calculated using monthly average

dairy product prices for the month in question. In the

folowing example, component prices for Aug 2017

is calculated by using the monthly (weighted) average of

different weekly NASS prices. They were then released on

Sep 01, 2017

The component prices calculated in the section use monthly

average U.S. NASS survey prices. These monthly average prices

are calculated by a weighted average.

The monthly average prices used in this section are calculated

from NASS prices for each week.

These monthly average prices are as follows:

AA Butter | 2.6578 |

Cheddar Cheese | 1.6664 |

Dry Whey | 0.4345 |

Nonfat Dry Milk | 0.8733 |

= ((Cheese price – 0.1682) x 1.383) + ((((Cheese price – 0.1682) x 1.572) – Butterfat price x 0.9) x 1.17).

= ((1.6664 – 0.1682) x 1.383) + ((((1.6664 – 0.1682) x 1.572) – 2.6578 × 0.9) x 1.17).

= 1.6211

So, the Announced True Protein Component Price for Aug 2017 is 1.6211

= (Dry Whey Price – 0.1956) * 1.03

= (0.4345 – 0.1956) * 1.03

= 0.2389 * 1.03

= 0.2461

So, the Announced Other Solids Component Price for Aug 2017 is 0.2461

= (Nonfat Dry Milk Price – 0.157) * 0.99

= (0.8733 – 0.157) * 0.99

= 0.7163 * 1.03

= 0.7091

So, the Announced Non Solids Component Price for Aug 2017 is 0.8733

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 Sep 2017 is calculated by using the

bi-weekly (weighted) average of the two weeks preceding it.

These prices were then released on Aug 18, 2017

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 | 2.6728 |

Cheddar Cheese | 1.6698 |

Dry Whey | 0.4324 |

Nonfat Dry Milk | 0.8785 |

= (Protein Price * 3.1) + (Other Solids Price * 5.9)

= (1.6131 * 3.1) + (0.2439 * 5.9)

= 6.44

So, the Advanced Class III Skim Milk Pricing Factor for Sep 2017 is 6.44

= Nonfat Solids Price * 9.0

= 0.7143 * 9.0

= 6.43

So, the Advanced Class IV Skim Milk Pricing Factor for Sep 2017 is 6.43

These Class I Prices are calculated by adding applicable Class

I differentials (for varying locations throughout the country)

to advanced pricing factors for the month in question. In the

following example, Class I prices for Sep 2017 for Cook County,

Illinois are calculated using the appropriate Class I differential

and Advanced values for Sep 2017 released the previous month on

Aug 18, 2017

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 | 2.6728 |

Cheddar Cheese | 1.6698 |

Dry Whey | 0.4324 |

Nonfat Dry Milk | 0.8785 |

= (Higher of advanced Class III or Class IV skim milk pricing factors + applicable class1 differential)

= ($6.44 + $1.80)

= 8.24

So, the Class I Skim Milk Price for Sep 2017 is 6.44

= (Advanced Butterfat Pricing Factor + applicable class1 differential/100)

= ($3.0631 + $0.0180)

= 3.0811

So, the Class I Butterfat Price for Sep 2017 is 8.24

= (Class I Skim Milk Price x 0.965) + (Class I Butterfat Price x 3.5)

= ($8.24 × 0.965) + ($3.0811 × 3.5)

= 18.73545

So, the Class I Price for Sep 2017 for Cook County, IL is 18.73545

These Class Prices are based on Advanced Pricing factors released in the

month preceding the month in question. In the following example, the Class

prices for Aug 2017 are calculated using the advanced values, released on

Jul 21, 2017

= (Advanced Class IV Skim Milk Price + $0.70)

= 6.55 + 0.70

= 7.25

=(Advanced Class IV Skim Milk Price / 9)

= 6.55 / 9

= 0.8056

Class II Butterfat Price is based upon announced component prices

(butterfat price) which are obtained by a monthly average of NASS

weekly prices over 4 or 5 different weeks. These are released on

a Friday on or before the 5th of every month, for the previous

month. For example, the component prices for Aug 2017 was

announced on Sep 01, 2017.

The component prices calculated in the section use monthly

average U.S. NASS survey prices. These monthly average prices

are calculated by a weighted average.

The monthly average prices used in this section are calculated

from NASS prices for each week.

These monthly average prices are as follows:

AA Butter | 2.6578 |

Cheddar Cheese | 1.6664 |

Dry Whey | 0.4345 |

Nonfat Dry Milk | 0.8733 |

= (AA Butter Avg – 0.1202) *1.2

= (2.6578 – 0.1202) * 1.2

= 2.5376 * 1.2

= 3.0451

So, the Announced Butterfat Component Price for Aug 2017 is 3.0451 $/lb.

= Announced Butterfat Price + $0.0070

= 3.0451 + $0.0070

= 3.0521

So, the Announced Class II Butterfat Price for Aug 2017 is 3.0521

= (Class II Skim Milk Price x 0.965) + (Class II Butterfat Price x 3.5)

= (7.25 × 0.965) + (3.0521 × 3.5)

= 17.68

So, the Announced Class II Price for Aug 2017 is 17.68

These Class IV Prices for any given month are computed from class and

component prices for the month released by the 5^{th} of the

following month. In the following examples,the prices for Aug 2017

were based upon the class and component prices released on Sep 01, 2017

=(Nonfat Solids Price x 9)

= 0.8733 × 9

= 6.38

= (Class IV Skim Milke Price x 0.965) + (Butterfat Price x 3.5)

= 6.38 × 0.965 + 3.0451 × 3.5

= 16.81