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Effect of Seventeen Milk Pricing Systems on Producer's Price of Milk¹

Department of Animal Sciences
Department of Agricultural Economics, Washington State University, Pullman 99163
and Mayflower Farms, Inc., Portland, Oregon 97200

ABSTRACT

Seventeen milk pricing systems were applied to herd milk data to determine their effect on the price of milk received by producers. The systems included different values for fat, protein or solids-not-fat, and water. Each system was forced to distribute the same sum of money for the total pool of milk. The blend price equation of the Inland Empire Federal Milk Marketing Order, October 1969, was used to determine value of the pool. Maintaining the present fat differential (8.3 cents) and adding a value to either solids-not-fat or protein economically favored producers of milk with high fat test. Lowering the fat differential to either 6.5 cents or 4.5 cents and adding values for solids-not-fat economically favored producers of milk with low test. Placing a differential on protein and lowering the fat differential to 6.5 cents and in one system to 4.5 cents placed producers of milk with high fat test at an economic advantage. Systems with a fat differential of 4.5 cents and lower values for protein economically favored producers of milk with low fat test.

¹ Scientific Paper 3505, College of Agriculture Research Center, Project 1868.

² Present address: Fred Meyer, Inc., 3800 S.E. 22nd Avenue, Portland, Oregon 97200.