The Florida Dairy Business
(Acrobat version)

Volume 3 Issue 1

The Basic Formula Price (BFP) finished 1997 stronger than most economists had predicted when it increased to $13.29 for December. This was the sixth increase in a row for the BFP and the December price was $2.59 higher than in May. This is a 14 month high. We have to go back to October 1996 to find a higher BFP. This means Florida blend prices will climb through February 1998 because of the two month lag in Class I prices. The markets for milk and dairy products tightened in December 1997 to push the BFP well over $13.00.

The mailbox price will change a little differently. Class I prices for January 1998 will be lower than a month earlier because of the $.45 reduction in the premium in January. Remember the January Class I price is based on the November BFP. The November BFP increased $.13 from October, but since the premium was cut $.45 in January, the January price will be lower than December. The premium for February 1998 will be the same as for January. The table below shows all of these numbers.

There are numerous milk pricing issues hitting the news. The Secretary of Agriculture released the proposals for Federal Order Reform. The Secretary also announced that he will hold a hearing on February 17th to consider flooring the BFP until the Federal Order Reform is complete in April 1999. On February 9th, the Eighth Circuit Court of Appeals will hear oral arguments in the appeal of Judge Doty’s ruling on Class I differentials. The USDA lowered the support price to 10.05 for 3.67% BF milk as mandated by the 1996 Farm Bill, and an appeals court upheld the legality of the Northeast Interstate Dairy Compact. See inside for some more details on Federal Order Reform.

Unless the Appeals Court extends the stay of Doty’s decision to outlaw Class I differentials, which is by no means certain, milk marketing and pricing could quickly change in February.

"Top" Dairies Financial

A workshop was held in Orlando, FL in August 1997 by Mark Stephenson and Wayne Knoblaugh from Cornell University. The workshop was invitational for some of the "best" dairy producers from across the country. The producers provided financial information for the 1996 calendar year. Part of this information is summarized in the table below.

Exactly what is meant by "best" and how this is determined is not clear, but we thought it would be interesting to look at the summary. Those of you on the Dairy Business Analysis Project will have numbers that can be directly compared to those below. Use the table as a national benchmark. The east - west division is a line from North Dakota to Louisiana.

Florida Dairy
Production Conference

The Florida Dairy Production Conference will be a one-day program on May 5, 1998 at the Radisson Hotel in Gainesville. Dr. Ray Nebel, Reproductive Physiologist from Virginia Tech, and Carl Theunis, a dairyman from Wisconsin with an outstanding message on managing labor, will be the featured speakers. Dr. Nebel will talk about "Heat Detection in the Year 2000" and "Another Look at Timing of Insemination." Michael DeLorenzo will discuss "Florida Dairies Financial Performance" based on information from the Dairy Business Analysis Project. Other topics include protein nutrition, gossypol from cotton products, sources of nutrient loading in a river watershed, and laminitis.

Federal Order Reform

Fourth, minor revisions are made to products included in each class of milk. Eggnog would be reclassified from Class II to Class I, cream cheese would be reclassified from Class III to Class II, and Class III-A would be renamed Class IV, and would include butter and any milk product dried from it.

Fifth, various provisions, definitions and terms across Milk Marketing Orders will be streamlined.