WCMA Notes: a Processor Perspective on Price Reforms

Gyrating milk and cheese prices in this the most unusual marketing year in generations has spurred calls for federal order reform with a focus on negative PPDs.

The discussion deserves a processor perspective.

In August, Hoard’s Dairyman opined “As cheese soared to record prices, frustration boiled over in the countryside. That’s because negative producer price differentials (PPDs) torpedoed June milk checks with deductions over $7 per cwt. in four Federal Milk Marketing Orders.”

The frustration was real, but misplaced. A negative PPD does not mean farms received less than they “should have,” but rather reflects a fast-rising cheese price pushing the value of Class 3 milk past the earlier announced value for Class 1 fluid milk. “All that means,” economists Mark Stephenson and Andrew Novakovic wrote in a June 26 Information Letter, “is that we paid out more money to producers in Class III component values than we collected from plants across all classes of milk. For farmers, it is really just a curiosity in the accounting method.”

To read the rest of the story, please go to: Wisconsin Cheese Makers Association