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 Feb 2018 is calculated by using the

bi-weekly (weighted) average of data released on Jan 06

and Jan 13. The advanced price was released on Jan 19, 2018

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 | 2.2339 |

Cheddar Cheese | 1.5391 |

Dry Whey | 0.2792 |

Nonfat Dry Milk | 0.6926 |

```
Butter Prices and Sales
01/06/2018 - 02/03/2018
1/06 1/13 1/20 1/27 2/03
Weighted Price
(dollars per pound) 2.2373 2.2312 2.1822 2.1573 2.1524
Sales
(pounds) 2,204,941 4,227,298 4,525,163 4,120,575 5,156,109
---------------------------
```

Here we demonstrate how to calculate biweekly weighted average for butter

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

Jan 06 | 2.2373 | 2,204,941 | 4933114.4993 |

Jan 13 | 2.2312 | 4,227,298 | 9431947.2976 |

= (AA Butter Price – 0.1202) * 1.20

= (2.2339 – 0.1202) * 1.20

= 2.1137 * 1.20

= 2.5364

So, the Butterfat Advanced Pricing Factor for Feb 2018 is 2.5364

Component Prices are calculated using monthly average

dairy product prices for the month in question. In the

folowing example, component prices for Jan 2018

is calculated by using the monthly (weighted) average of

different weekly NASS prices. They were then released on

Feb 02, 2018

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 | 2.1972 |

Cheddar Cheese | 1.5175 |

Dry Whey | 0.2755 |

Nonfat Dry Milk | 0.6966 |

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

= ((1.5175 – 0.1682) x 1.383) + ((((1.5175 – 0.1682) x 1.572) – 2.1972 × 0.9) x 1.17).

= 1.7233

So, the Announced True Protein Component Price for Jan 2018 is 1.7233

= (Dry Whey Price – 0.1956) * 1.03

= (0.2755 – 0.1956) * 1.03

= 0.0799 * 1.03

= 0.0823

So, the Announced Other Solids Component Price for Jan 2018 is 0.0823

= (Nonfat Dry Milk Price – 0.157) * 0.99

= (0.6966 – 0.157) * 0.99

= 0.5396 * 1.03

= 0.5342

So, the Announced Non Solids Component Price for Jan 2018 is 0.6966

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 Feb 2018 is calculated by using the

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

These prices were then released on Jan 19, 2018

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 | 2.2339 |

Cheddar Cheese | 1.5391 |

Dry Whey | 0.2792 |

Nonfat Dry Milk | 0.6926 |

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

= (1.7465 * 3.1) + (0.0861 * 5.9)

= 5.92

So, the Advanced Class III Skim Milk Pricing Factor for Feb 2018 is 5.92

= Nonfat Solids Price * 9.0

= 0.5302 * 9.0

= 4.77

So, the Advanced Class IV Skim Milk Pricing Factor for Feb 2018 is 4.77

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 Feb 2018 for Cook County,

Illinois are calculated using the appropriate Class I differential

and Advanced values for Feb 2018 released the previous month on

Jan 19, 2018

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 | 2.2339 |

Cheddar Cheese | 1.5391 |

Dry Whey | 0.2792 |

Nonfat Dry Milk | 0.6926 |

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

= ($5.92 + $1.80)

= 7.72

So, the Class I Skim Milk Price for Feb 2018 is 5.92

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

= ($2.5364 + $0.0180)

= 2.5544

So, the Class I Butterfat Price for Feb 2018 is 7.72

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

= ($7.72 × 0.965) + ($2.5544 × 3.5)

= 16.3902

So, the Class I Price for Feb 2018 for Cook County, IL is 16.3902

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 Jan 2018 are calculated using the advanced values, released on

Dec 22, 2017

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

= 5.00 + 0.70

= 5.70

=(Advanced Class IV Skim Milk Price / 9)

= 5.00 / 9

= 0.6333

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 Jan 2018 was

announced on Feb 02, 2018.

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 | 2.1972 |

Cheddar Cheese | 1.5175 |

Dry Whey | 0.2755 |

Nonfat Dry Milk | 0.6966 |

= (AA Butter Avg – 0.1202) *1.2

= (2.1972 – 0.1202) * 1.2

= 2.077 * 1.2

= 2.4924

So, the Announced Butterfat Component Price for Jan 2018 is 2.4924 $/lb.

= Announced Butterfat Price + $0.0070

= 2.4924 + $0.0070

= 2.4994

So, the Announced Class II Butterfat Price for Jan 2018 is 2.4994

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

= (5.70 × 0.965) + (2.4994 × 3.5)

= 14.25

So, the Announced Class II Price for Jan 2018 is 14.25

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 Jan 2018

were based upon the class and component prices released on Feb 02, 2018

=(Nonfat Solids Price x 9)

= 0.6966 × 9

= 4.81

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

= 4.81 × 0.965 + 2.4924 × 3.5

= 13.37