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Agricultural Marketing Service
The agency of the U.S. Department of Agriculture that administers federal milk marketing orders.
All Milk Price
A weighted average of the prices dairy processors pay for all grade A and grade B milk, calculated by the NASS and usually reported for milk of average fat test.
See Agricultural Marketing Service.
Free from bacterial contamination, sterile; used to describe a type of food processing and packaging characterized by non-refrigerated storage and long shelf-life products (see UHT and ultrapasteurized).
Agricultural Stabilization and Conservation Service. The agency of the U.S. Department of Agriculture that administers the dairy price support program.
In general usage, this may refer to the procurement of raw materials or inputs by a business. In dairy markets, it refers specifically to the transportation of milk to processing plants. Sometimes a distinction is made between farm milk pickup (truck moves from ranch to ranch) and over-the-road or long-haul assembly (truck moves from last ranch on route to plant for delivery).
A charge levied for the purpose of generating revenues. Various assessments are or have been used as part of both federal and state dairy programs.
Assessments are charged by Dairy Marketing and Milk Pooling Branches to cover the cost of operating the California state programs. The Branches also assess and collect fees for other agencies, such as the Dairy Council of California. A per hundredweight charge is specified for both handlers and producers. A typical charge for producers range from 0.5¢ to 1.7¢ per hundredweight of milk received by the handler. Handler assessment rates range from 0.4¢ to 1.7¢ per hundredweight of milk processed.
Off and on since 1983, marketing assessments have been levied on dairy farmers operating in federal milk marketing orders by the U.S. Department of Agriculture. These per hundredweight assessments on milk marketings have been used to defray the cost of the Dairy Price Support Program or associated supply management programs (see Dairy Collection Plan).
Promotion assessments are per hundredweight charges on milk marketings of dairy farmers by the National Dairy Board or another generic dairy promotion agency (see Promotional Check-off). The current assessment is 15¢ per hundredweight.
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Generally, this refers to any bargaining cooperative; however, the term was specifically codified in New York's Rogers-Allen Law of 1937. This law enables producer cooperatives to form producer bargaining agencies and milk dealers to form distributor bargaining agencies. The agencies formed are given certain specified powers relative to the establishment and operation of the business.
Association of producers whose major function is to negotiate prices and provide buyers for the milk produced by members. Some associations may operate manufacturing or processing facilities, but these activities are not generally the focus of the business. In contrast, some of California's processing cooperatives have significant roles as dairy product manufacturers.
An on-farm structure that houses dairy cows. It consists of multiple individual stalls arranged in rows with the rows separated by alleys. Freestall barns are open-sided structures with only a roof supported by poles. Cows are free to wander and occupy any open stall when in the barn, as opposed to a stanchion barn, in which cows occupy
Barn, Milking (Milking Parlor)
An on-farm structure which contains the milking machine. Cows are brought to the milking barn in large groups for milking, usually twice and sometimes three times a day. The barn may be referred to by the arrangement of the milking machine. For example, a herringbone barn is a milking barn that contains a milking machine with parallel stalls at angles, resembling the bones of a fish. A rotary barn describes a milking machine built in a circle that rotates as cows are
An older style, on-farm structure that houses dairy cows. Stanchion barns are typically enclosed on all sides. Cows occupy designated stalls, as opposed to a freestall barn, in which cows are free to wander and occupy any open stall.
A form of packaging rather than a type of cheese. The barrel is a plastic-lined cardboard container that holds approximately 500 pounds of cheese. Barrel packaging is typically used for bulk cheese that will be further processed.
A pricing plan to encourage producers to adjust their production to a desirable seasonal pattern. It involves the annual (re-) assignment of a production base that reflects that producer's deliveries during a specified period of time of year when demand for milk is strong. The producer then receives a higher price for milk produced up to the amount of the production base and the "excess" or surplus price for additional supplies. A base-excess plan typically is authorized and administered under a federal order, but it may be established by a cooperative for its members.
The official federal order term is uniform price, sometimes also called the pool price. It is the average of class prices weighted by marketwide utilization. Blend prices pertain to a specified butterfat content and location within an order area.
A voting procedure wherein a bona fide, approved cooperative may cast votes representing its entire membership, if its board of directors so requests. In federal milk marketing orders, bloc voting may be prohibited under some circumstances in referendums, depending on the issue put to vote. In some orders, cooperative members who wish to vote differently from their cooperative may be able to request an individual ballot.
A form of packaging rather than a type of cheese. The block is approximately 40 pounds of cheese. Block packaging, like barrel packaging, is typically used for bulk cheese that will be further processed.
Raw milk from a dairy farm, as stored in a bulk tank; in contrast with packaged milk. Other bulk products, such as condensed skim and cream, may also be transported in bulk form.
Bulk Tank Unit
An administrative entity used as a means of identifying pool bulk delivered by groups of producers in some marketing orders. The bulk tank unit is an accounting device that should not be confused with a bulk tank, which is the on-farm equipment that holds milk until it is picked up by a milk hauler.
In federal milk marketing orders, the amount added to or subtracted from a farmer's milk price to reflect the value of milkfat above or below a standard reference mark, usually set at 3.5 percent milkfat. The butterfat differential is expressed as cents per one-tenth of a percent of milkfat and is based off of the bulk butter market. As of January, 2000, the butterfat differential is no longer used in the calculation of federal order milk prices.
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California Department of Food and Agriculture*
A state department that serves the citizens of the California by promoting California agriculture and fostering public confidence in the market place through the development, implementation, and communication of sound public policies. Among its 1,700 employees statewide are scientists, economists, marketing specialists, laboratory technicians, administrators and communicators.
California Manufacturing Milk Advisory Board*
A board that initiates promotions, funded by assessments on grade B milk production. The program is administered by the California Milk Advisory Board staff.
California Milk Advisory Board*
A board involved in advertising, promotion and research for the California dairy producers, funded by assessments on grade A milk production.
Call Handler / Supply Handler
In California, any handler whose total direct and derived milk solids-not-fat Class 1 usage equals or exceeds 80% of total market milk solids-not-fat received or diverted, and whose direct and derived milk solids-not-fat Class 4a and 4b usage does not exceed 5% of total market milk solids-not-fat received or diverted. A supply handler is any handler that does not qualify as a call handler. Call handler and supply handler designations pertain to the administration of call provisions.
The major protein contained in milk and the primary protein in cheese. Also a protein curd or dried product made from milk casein curd.
Cash Forward Contracting
A solution to the problem of price volatility that allows processors and producers alike to "lock in" the price paid and price received). This voluntary agreement occurs as a contract between a producer and a processor and establishes a fixed price for milk to be delivered to the processor over a known period of time. By its nature, cash forward contracting does not interface well with minimum pricing laws and is only approved for use in federal milk marketing orders under specific circumstances.
See Commodity Credit Corporation.
See California Department of Food and Agriculture.
Chicago Mercantile Exchange
The CME is an international marketplace enabling institutions and businesses to manage their financial risk. Futures and options contracts traded at the CME include currencies, interest rates, stock indexes and agricultural commodities. CDFA uses dairy commodity cash market data to establish minimum milk prices.
Under marketing orders, milk is classified according to how the milk is used (See Classified Pricing, Class 1, Class 2, Class 3, Class 4a and Class 4b.)
Each class of milk usage is priced differently. In theory, fluid milk has the highest price while manufacturing milk has the lowest price.
Class 1 Milk*
The (theoretically) highest priced category in a classified pricing plan. Includes milk used in fluid whole milk and generally includes related fluid products. Milk products in this category are milk, skim milk, lowfat milks, milk drinks, half-and-half, and filled milk. A very similar classification is made under the federal milk marketing order system, where it is termed "class I".
Class 1 Price*
The minimum price that handlers must pay for milk going into Class 1 uses (see Class 1 Milk). It is announced every month in California (class I is announced every month in federally regulated milk markets as well). The level of the Class 1 price depends on national commodity markets; it uses the higher of the national cheese price or the butter/powder prices.
Class I Differential
In federal milk marketing orders, it is the constant factor added to the Class I price mover to determine the class I price in any given month. The differential varies by location, generally being the lowest in areas with abundant milk supplies and small populations (such as Wisconsin and New Mexico ) and highest in areas with moderate milk supplies and large populations (Florida and other Southeastern states).
Class 2 Milk*
An intermediate product category in the classified pricing plan. This pricing category includes cottage cheese (all types), fluid cream products, yogurt, buttermilk and eggnog. Under federal milk marketing orders, it is termed class II and includes most of the above products as well as ice cream and other frozen dairy desserts.
Class 2 Price*
Minimum price handlers must pay for milk used in Class 2 category. In general, the Class 2 price is tied directly to the Class 4a price by a differential.
The Class 4a price is based on prices of bulk butter and bulk nonfat dry milk.
Class 3 Milk*
An intermediate product category in the classified pricing plan. This pricing category includes ice cream, ice cream mixes and other frozen dairy desserts. Under federal milk marketing orders, it is termed class II and includes all of the Class 2 products as well as the dairy desserts. In federal orders, Class III refers to a manufacturing product category that includes all cheeses except cottage cheese.
Class II Milk
An intermediate product category in the federal order classified pricing plan. It includes all of the products categorized as Class 2 as well as the dairy desserts.
Class 3 Price*
Minimum price handlers must pay for milk used in Class 3 category. In general, the Class 3 price is tied directly to the Class 4a price by a differential. The Class 4a price is based on prices of bulk butter and bulk nonfat dry milk. The Class 3 price is always slightly less than the Class 2 price.
Class III Milk
In federal orders, Class III refers to a manufacturing product category that includes all cheeses except cottage cheese.
Class 4a Milk*
A manufacturing product category in the classified pricing plan that includes butter and powdered milk products. In federal orders, this product category is referred to as "Class IV".
Class 4a Price*
The minimum price handlers must pay for milk used in Class 4a category. The Class 4a price is based on prices of bulk butter and bulk nonfat dry milk.
Class 4b Milk*
A manufacturing product category in the classified pricing plan that includes all cheeses except cottage cheese. In federal orders, this product category is referred to as "Class III".
Class 4b Price*
The minimum price handlers must pay for milk used in Class 4b category. The Class 4b price is based on prices of block Cheddar cheese and bulk butter.
Class IV Price
In federal orders, Class IV refers to a manufacturing product category that includes butter and all powdered milks.
See California Milk Advisory Board.
See Chicago Mercantile Exchange.
Negotiation between employer and labor representatives regarding wages, hours and working conditions. In the dairy industry, bargaining may take place between cooperative and dealer representatives, as well as between unions and plant or ranch management.
Commodity Credit Corporation (CCC)
A wholly owned federal corporation within the U.S. Department of Agriculture, subject to the direction of the Secretary of Agriculture. Price support purchases and many other commodity program activities involving expenditures of funds are conducted by the CCC.
Commodity Reference Price*
As a cornerstone of the Class 1 price calculation, the CRP computes a value for milk by relating how much product can be made from a given quantity of milk and the value of the product.
Also known as 'multiple component pricing', it is a pricing method that assigns value to individual portions of milk. In California, value is assigned to the fat and solids-not-fat portions of milk in all classes. Value is also assigned to the fluid carrier of milk for Class 1. In some federal milk marketing orders, value is assigned to protein specifically, not to solids-not-fat.
Consumer Milk Price Survey
Created by SB 419 and authored by Senator Jackie Spier, the CMPS records retail prices charged for milk throughout the State. The survey records retail prices for a one-week period each month with the results posted CDFA's website and available by phone. The survey is administered by CFDAÕs Division of Marketing.
An organization of separate cooperatives that are joined in an umbrella organization in which each cooperative remains autonomous in most of its operations. It is a cooperative of cooperatives. Cooperatives may federate to enhance price bargaining power, gain marketing or processing efficiencies, or for political purposes.
In federal orders, they are payments made from the order pool to cooperatives and federations which qualify by meeting certain performance requirements. This provision pays cooperatives for services they provide rather than charging non-cooperative producers for services provided by the market administrator (market service deductions).
See Commodity Reference Price.
Abbreviation for hundredweight, which is one hundred pounds. By convention, milk prices are often discussed in terms of dollars per hundredweight.
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Dairy Collection Plan
Name given by ASCS to programs for collecting assessments from dairy farmers. Authorized under various federal dairy policies, these assessments are used to defray the costs of the dairy price support program (DPSP) or related programs.
Dairy Council of California
Provides nutritional education programs and information that stimulate demand for milk and dairy products.
Dairy Herd Improvement Association (DHIA)
Cooperative organization with programs and objectives intended to improve production of dairy cattle and profitability of dairy farming and especially to aid dairy farmers in
keeping milk production and management records.
Dairy Marketing Branch*
The Dairy Marketing Branch promotes, fosters and encourages sound production and marketing of milk that reflect market conditions by resolving critical policy issues. The Branch is a substructure of the California Department of Food and Agriculture and is organized into several smaller units, each of which concentrates on a specific area of work but contributes to the overall mission of the Branch. The Branch holds public hearings periodically to allow for public input on the milk pricing system.
Dairy Management, Inc. (DMI)
DMI is a nonprofit planning and management organization formed in 1995 by the National Dairy Board and United Dairy Industry Association. It conducts integrated programs in
marketing communication, promotion and research on behalf of U.S. dairy farmers.
Dairy Price Support Program (DPSP)
Layman's term used to refer generally to federal policies to support farm milk prices, but distinct from federal milk marketing orders and dairy import quotas. More specifically, it refers to the program whereby the USDA attempts to support farm incomes by establishing minimum prices at which the federal government will purchase certain manufactured dairy products. These purchase prices are calculated so as to enable manufacturers to cover their costs and pay farmers a price equivalent to the support price. The support is a "soft floor", so termed because producers may receive less than the established support price. The legal basis for the DPSP is the Agricultural Act of 1949, as amended. The program is administered by the CCC under the direction of ASCS.
See Dairy Herd Improvement Association.
In general usage, this may refer to the shipping of products from a business. In dairy markets, it refers specifically to the transportation of dairy products from a processor to a retailer or other such vendor.
See Dairy Marketing Branch.
See Dairy Management, Inc.
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Economic Research Service
An agency of USDA which conducts economic research and provides information and analysis of economic programs and agricultural and food industries.
See Producer Settlement Fund.
Refers to the equalizing or blending procedure in federal milk marketing orders whereby processors pay for milk according to use but farmers are guaranteed a minimum price equal to the average marketwide value of all uses. Handlers whose obligations exceed the marketwide average per cwt. make a payment to the market administrator. Handlers whose obligations are less than the marketwide average per cwt. receive a payment from the market administrator. These payments (to and from the market pool) allow each processor to equalize the payment to farmers even though the processor pays for milk on the basis of use (i.e., class prices). Equalization payments to a processor are sometimes called the pool draw (see Producer Settlement Fund).
See Economic Research Service.
Formal written complaint that can be made against any USDA recommended federal order decision. These are considered by the USDA before a final decision is made on an amended or new order.
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A somewhat loosely used term to indicate cheese made by dairy farmer, at or near place of milk production. Typically, cheese production volumes are small and target niche markets.
Estimated quantity of milk calculated on a 4.0 percent butterfat energy basis. It is a means of evaluating milk production records of different dairy animals and breeds on a common energy basis . The following formula is used: FCM=(0.4 * milk production)+(15 * pounds of fat produced).
A product containing less than 0.5 g of fat per reference amount and per labeled serving. The product must contain no added ingredient that is fat or understood to contain fat.
Federal Milk Marketing Order (FMMO)
A legal document which spells out the terms under which federal regulated handlers purchase milk from dairy farmers. The legal basis for federal orders is the Agricultural
Marketing Agreement Act of 1937, as amended.
Federal Order Hearing
A meeting officially called by the U.S. Secretary of Agriculture to consider creation and implementation of a new order or changes to an existing order. All interested parties have opportunity to present testimony relative to the issues involved. A recommended decision is developed based on the hearing record, upon which comments or exceptions can be made.
Milk from which natural milkfat has been removed and replaced with other fats or oils from plant sources.
The final decision is the order issued by USDA and voted upon in a referendum of all affected producers. If approved by at least two-thirds of the producers voting, the final order becomes effective. As such it has the status of any federal law. If not approved, the entire marketing area becomes unregulated. In effect, the producers vote to either keep the marketing order with the amendments or do away with any form of regulation. Producers do not get to vote only on the contents of the final decision.
A subclass of fluid (packaged milks) to which flavoring has been added, such as chocolate, strawberry and vanilla.
Fluid Milk Products
In both California and federally regulated markets, it is a generic term for Class 1 products, although the two terms are not necessarily identical. Usually refers to all drinkable milk products, such as whole milk, flavored whole milk, concentrated whole milk, filled milk, skim milk, fortified skim milk, lowfat milk, milk drinks and half-and-half. Buttermilk, eggnog, light cream, and whipping cream are actually Class 2 products, despite their similarities to Class 1 products.
Time of the year, usually spring and early summer, of maximum milk production. During this period, fluid milk utilization is normally the lowest. Manufacturing facilities are usually operating at full capacity because there is a considerable daily surplus above the market fluid needs.
F.O.B factory price
"F.O.B."is an abbreviation for "free on board". It is a geographic pricing strategy whereby the buyer pays all freight from the F.O.B. location to the destination
A futures contract is a sales contract that specifies a description of the commodity to be traded, the quantity of the commodity to be traded, the delivery point, the delivery period and the terms of delivery.
In short, everything except the price is fixed and known in advance. The commodity to be traded must also be undifferentiated (not branded) and homogeneous. The terms of the contract make it "tradable", whereas cash forward contracts are not easily exchanged between parties because they are very specific in their terms.
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