According to information published by the Upper Midwest Federal Milking Marketing Order 30 market administrator's office, Wisconsin climbed to fifth place among the states or regions during three of the latest five months for which mailbox prices for milk have been calculated.
Those months in 2012 were April, July and August, which is the latest month for which the mailbox prices are available. The mailbox price is the average per hundred payment for milk received by dairy farmers after associated marketing costs such as hauling and promotion and research fees are deducted.
In August, for example, the average mailbox price in Wisconsin was $18.91 per hundred, trailing only Minnesota at $19.02, a group of five Appalachian states at $19.23, a group of five Southeast states at $19.98, and Florida at $21.41. The latter three prices are due to a combination of the high Class I fluid milk differential payment rates in those areas and the high percentage of the locally produced milk which goes into the Class I market.
During earlier months in 2012, Wisconsin's mailbox prices were $17.55 per hundred for July, $16.94 for June (sixth place), $16.81 for May (seventh place), $17.46 for April, $17.57 for March (eighth place), $18.16 for February (eighth place), and $19.31 for January (11th place). During most of those months, Minnesota was one notch ahead of Wisconsin on the mailbox price by 1-9 cents per hundred.
Where Wisconsin excels on its milk price, compared to most other states, is on the combination of milk quality and volume premiums paid by processors, along with a special over-order Class I premium that is negotiated with milk fluid bottlers.
In most cases, Wisconsin dairy farmers are also charged less for milk hauling (buyers subsidize part of the cost) than their counterparts in many other parts of the country.
That overall price advantage can be checked when comparing the state's mailbox price with the national Class III base price that changes every month. For August, the Class III base price was $17.73 per hundred while the average mailbox price in Wisconsin $18.91 or a net premium payment of $1.18 per hundred.
The spreads in 2012 between the Wisconsin mailbox and Class III prices included 87 cents per hundred in July, $1.31 in June, $1.58 in May, $1.74 in April, $1.85 in March, $2.10 in February, and $2.26 in January. Only a small portion of those differences can be attributed to the $1.60-$1.75 per hundred differential for Class I fluid milk which applies in most areas of the state because the portion of the milk produced in Wisconsin going into the fluid market has fallen to just over 10 percent in most recent months.
Although it stands in first place among the states in milk production, California is last among the states or regions in its mailbox milk price. For 2012, California's mailbox prices have been as low at $13.97 per hundred in May and in the $14s for four other months through August of this yea, while the highest prices are $16.20 for August and $16.36 for January.
The low milk prices in California are due in large part to its state-based milk pricing formula rather than being in the federal milk marketing order system. In California, the state has a cap of 75 cents per hundred in what milk buyers pay for the value of whey in milk, while the value of whey in the federal marketing order pricing has accounted for more than $3 per hundred of the Class III base price for milk during all months of 2012.
This pricing disparity has created significant unrest among California's dairy operators and their member organizations, but so far their requests to increase the pricing cap for whey have failed to gain support from the agency which establishes California's separate northern and southern region milk prices.
In 2010, the California mailbox milk price averaged $1.24 per hundred less than the national Class III base price. Since then, the gap has been running at closer to $2 per hundred.
Most recently, there has been some interest in California's dairy sector about switching from its long-standing state to the federal pricing system.
In Idaho, the Dairymen's Association has taken a similar stance in the form of a resolution which cited a $1.60 per hundred disparity between prices being paid by processors in one major marketing area compared to what the minimum price would have been under a federal milk marketing order.
New Mexico is another state near the bottom on the mailbox milk pricing scale. Its prices during most months in 2012 have been about 20-50 cents above those in California. The lowest prices have a range of $14.33-$14.67 for April through June, while the year's highest monthly mailbox prices have been $16.51 in August and $17.10 in January.