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Economic Research Institute Study paper


Utah State University

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For the first time in the federal milk order system, the USDA has recommended the use of multiple component pricing in charging handlers for surplus Grade A milk used in manufactured products, and in paying producers for Grade A milk. The recommended plan would price milk on the basis of its protein and butterfat components. Th is would be a change from the historic method of pricing milk per hundredweight at 3.5 percent butterfat, plus a butterfat differential. This recommendation follows a public hearing held March 18-20, 1986, in Salt Lake City, Utah, and would apply to the new "Great Basin" federal milk order under a proposal to merge the present Great Basin and Lake Mead federal orders (USDA). The pricing plan adopted could become a model for inclusion in other federal milk orders.