USDA announced this morning that the Class I price for October is $15.53, a drop of $2.12 from September. The announcement had been delayed since last week, giving USDA more time in light of a legal challenge to amend make allowances.
According to Harold Ferguson with the Federal Milk Market Order Administrator's office in Minneapolis, just 30¢ of the reduced Class I price was due to the change in the make allowance. (The make allowance compensates manufacturers for the cost of producing cheese, butter and non-fat dry milk. As it increases, producer prices decline because pricing formulas are zero-sum.) The 30¢ is right in the center of where USDA predicted Class I prices would decline when the new make allowances were proposed.
The balance of the decline in the Class I price, $1.82/cwt, is the result of declining fat and protein prices, says Ferguson.
For more detail on the changed make allowances, go to: http://www.agweb.com/dairytoday/Article.aspx?id=144576 and http://www.agweb.com/dairytoday/Article.aspx?id=143905