Milk Price Outlook

Cam Thraen, Agricultural Economist

The announced Basic Formula Price (BFP) for July is $14.77 per cwt. for milk testing 3.5 percent butterfat. This price is up $1.67 over the July price and $3.91 higher than July 1997. The current butterfat differential for July is 22.3 cents. A year earlier the butterfat differential was 11.0 cents.

A key to profitable marketing is an understanding of how the BFP is determined each month. The calculation is rather simple. Each month the National Agricultural Statistics Service, NASS, compiles a price survey from dairy plants in Minnesota and Wisconsin which reports the price actually paid for manufacturing grade milk This survey price, the M/W base month price, is reported by NASS for the month prior to the current BFP price report. For June this survey price averaged $13.17, which is $2.12 higher that the base month price for May. To arrive at the announced July BFP, NASS adds an adjustment to this price to reflect the prices observed in the product markets (mostly cheese value). For July this adjustment is a plus $1.60, therefore the announced BFP is $13.17 + $1.60 = $14.77.