Blimling & Assoc. Provide USDA Cost of Production Survey Analysis
In mid-February, USDA announced the release of a Cost of Production study for Cheese, Whey, Butter and Nonfat Dry Milk Plants. The study was conducted by Dr. Mark Stephenson (Director of Dairy Policy Analysis at the University of Wisconsin-Madison) at the request of USDA and gathered data from dairy processing plants located throughout the US. The study is available at https://dairymarkets.org/cop/ Report/2021_COP_Report.pdf .
Our consulting economists at Blimling and Associates provide this analysis:
According to the survey, manufacturing costs increased for cheese, whey and NFDM and declined for butter
Cheese: Old-$0.2003; New $0.2476
Butter: Old $0.1712; New $0.1411
NFDM: Old $0.1678; New $0.2933
Dry Whey: Old $0.1991; New $0.2650
Participation was light, and included: 10 Cheese Plants, 14 Butter Plants, 29 NFDM Plants, & 8 Whey/WPC Plants
Using the new cost figures as “make allowances” in existing FMMO formulas would have the estimated impact of:
Class I – down $0.88/cwt
Class II – down $0.95/cwt
Class III – down $0.83/cwt
Class IV – down $0.95/cwt
At this stage these are just new cost numbers and estimated impacts. The process for converting them to new class milk prices will likely be a long and arduous one – it will take months, perhaps years unless there is an industry consensus on the proper adjustments to make allowances.
Please feel free to contact us if you have any additional questions you’d like to forward to WUD or Blimling & Associates Staff. *These figures and estimates are not connected to WUD’s Board positions or policy opinions.