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Balancing Supplies with Sales in Fluid Milk Markets

Department of Agricultural Economics, University of Connecticut, Storrs

ABSTRACT

In 77 markets regulated under federal milk orders throughout 1964, the percentage of Class I milk varied from 39 (Chicago) to 94 (Austin-Waco). Numbers of markets in different ranges of Class I percentages were as follows:

With the Class I price higher than other class prices, one way to improve the blend price paid farmers in given markets is to raise the Class I percentage. With class prices unchanged and a difference of $2 per hundredweight between Class I and II prices, each increase of one percentage point in the Class I percentage means an increase in the blend price of 2.0¢ per hundredweight of milk.¹

This article reports on causal factors in general that affect Class I percentage, deviations from expected Class I percentages in particular markets, and significance of the statistical results. Interest in individual market situations as to Class I percentages, always of economic importance, has been increased recently by the Food and Agriculture Act of 1965, permitting Class I bases in federal order markets and favoring the continuation of separate market orders, not their consolidation.

¹ In 1964 the range in differences between Class I and Class II (or the lowest-priced class) was from $0.51 (Northeastern Wisconsin) to $3.59 (Southeastern Florida), and the simple average difference for the 77 federal order markets was $1.75.