The Milk Producer - November 2010 - (Page 44)

MARKETS Pricing formulas explained P reliminary data based on a national fluid milk pricing formula show a fluid milk price increase of $2.67 per hectolitre or 2.87 per cent, says Phil Cairns, Dairy Farmers of Ontario senior policy adviser. The national formula, adopted early last year to harmonize fluid pricing in the P5 and Western pools, uses weightings of 30 per cent consumer price index (CPI), 40 per cent producer cash costs and 30 per cent personal disposable income. The new agreement called for four price adjustments: Feb. 1, 2010, Aug. 1, 2010, Feb. 1, 2011 and Aug. 1, 2011. It also called for announcing intended price adjustments 75 days before they take place. Preliminary results relating to the formula show a CPI increase for February 2011 of 1.39 per cent, a personal disposable income increase of 1.48 per cent and a cash cost and interest increase of 5.02 per cent. “A $2.67 per hL price increase in fluid milk would increase the P5 producer blend price by about 93 cents per hL,” says Cairns. By agreement of all provinces, the current formula is in effect until August 2011, after which it will be reviewed. Class 1 prices would be adjusted in August only if the annual increase projected by the formula is greater than or equal to two per cent. In this case, the August adjustment would equal half the projected increase, and there would be another increase the following Feb. 1. Industrial milk pricing formula Each year, the Canadian Dairy Commission (CDC) uses a national cost of production (COP) study to determine P5 and Western Milk Pool blend prices* The graph below shows the 12-month blend price for the P5 provinces and the Western Milk Pool (WMP). *There is a two-month lag reporting these figures. Solids non-fat to butterfat (SNF-BF) ratio This graph shows Ontario’s SNF-BF ratio for the last 12 months in relation to Ontario’s target SNF-BF ratio of 2.2840. 78 76 Blend price in $/hL 74 72 70 68 P5 $72.47 WMP $74.92 2.45 2.4 SNF-BF Ratio 2.35 2.3 2.25 2.2 2.15 2.327 Sept 2009 Oct 2009 Nov 2009 Dec 2009 Jan 2010 Feb 2010 Mar 2010 Apr 2010 May 2010 June 2010 Aug 2010 Sept 2010 P5 blend price WMP blend price Ontario’s SNF-BF ratio Target SNF-BF ratio 44 | November 2010 | MilkPRODUCER Oct 2009 Nov 2009 Dec 2009 Jan 2010 Feb 2010 Mar 2010 Apr 2010 May 2010 June 2010 July 2010 Aug 2010 Sept 2010

Table of Contents for the Digital Edition of The Milk Producer - November 2010

The Milk Producer - November 2010
Contents
Editor's Notes
DFO Chair's Message
Provincial Perspectives
Dairy Update
Farm Finance
DFC Promotion
Issues Update
Research
Applied Science
Ruminations
Markets
New 'N' Noted
Back Forty

The Milk Producer - November 2010