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MILK PRICE NEWS A publication of the Minnesota Dairy Producers Board 123 1/2 E. Broadway, Little Falls, MN 56345, 320-632-5867 or 616-5847Zero for other solids seen by farmers for the first time |
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OCTOBER 1998 |
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| Skyrocketing retail butter prices have
Minnesota’s dairy farmers as much up in the air as consumers over the
soaring price increase which renews the debate over the fairness of
component pricing, say consumer representatives on the Minnesota Dairy
Producers Board.
Component pricing determines the price paid to dairy farmers for the components of butterfat, protein, and other solids that comprise milk which are manufactured into other dairy products. Butterfat is made into butter and protein into cheese. The unfairness for the farmers arises when a drastically higher price paid for one milk component subtracts from the prices paid for the other milk components. This is the current case with the soaring butter price which has caused the farmers protein price to plummet and their price for other solids to be zeroed out, the board members said. Farmers can’t quickly shift breeding to meet radical component price swings Farmers who have been breeding their herds for one component can’t suddenly shift to breeding for another component when the valuation radically changes, the board explained. The drop in protein price causes serious problems for farmers who have bred their herds for protein. Some herds don’t get as high a butterfat value to make up for the loss in protein value; whereas, other kinds of cows get a higher butterfat value. |
Under the complexity and confusion of
component pricing, co-ops have the power under the Capper-Volstad Act of
1922 to make adjustments among the components themselves by shifting the
values between them, the board explained.
On the other hand, proprietary companies must adhere to set prices for components under the federal marketing administration which can’t deviate from the established values unless they are enhanced for competitive reasons from the companies’ overall revenues. "This continual changing of component values between the different kinds of cows being milked shows the difficulty that farmers have in knowing what component to produce for under the component pricing system," said board president Jeff Kunstleben. "Because more farmers have bred for protein, there’s more losers than winners in this milk pricing game," he concluded. Consumers see high butter prices undercutting farmers protein and other solids prices "By looking at the milk checks of the dairy farmers we sit next to on the board, we consumers can see that the farmers’ September price for the protein component will be drastically undercut in their checks, and the price for the component of other solids zeroed out as a result of the higher butter price," said Ken Christianson of the Minnesota Senior Federation. |
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